Tax Briefing. 5 October 2016

Transcription

1 Tax Briefing 5 October

2 Agenda Latest HMRC proposals for taxing non-uk domiciliaries from April 2017 Transparency of wealth and taxes are clients and their advisers ready? Spanish TAX VAT Gibraltar Update Gregory Jones Derek Scott Alexandra Sanchez Sandra Skuszka Darren Anton 2

3 Reforms to the Taxation of UK Non-Domiciliaries Gregory Jones 5 October

4 Reforms to the taxation of UK non-domiciliaries Inheritance tax on UK residential property. Deemed UK domicile for long-term residents. Deemed UK domicile for UK residents born in the UK with a UK domicile of origin. 4

5 Inheritance tax on UK residential property From 6 April 2017 all UK residential property will come within the scope of IHT, regardless of the form of ownership. How? - At present shares in a non-uk company are excluded from IHT if owned by a non-dom or a trust settled by a non-dom. - From 6/4/17 shares in a non-uk close company will NOT be excluded if and to the extent that their value is derived from UK residential property. - Equally, where a non-dom is a member of an overseas partnership which holds UK residential property, the partnership interest will no longer be excluded property. 5

6 Inheritance tax on UK residential property: Example (Non-Dom) 1m worth of GibCo shares no longer excluded property therefore subject to IHT Mr X GibCo Ltd Remainder ( 2m) of value of GibCo shares still excluded property therefore outside scope of IHT UK house worth 1m Other assets worth 2m 6

7 Inheritance tax on UK residential property (continued) As a consequence of the new rule, from 6 April 2017 IHT will become chargeable in the following situations: - death of an individual owning shares in an offshore company which owns UK residential property; - death of an individual who has made a gift in previous 7 years of shares in an offshore company which owns UK residential property; - a gift into trust of shares in an offshore company which owns UK residential property; - 10 year anniversary of a trust owning shares in an offshore company which owns UK residential property; - death of a life tenant of a pre-march 2006 IIP trust which owns shares in an offshore company owning UK residential property. 7

8 Inheritance tax on UK residential property (continued) Property caught only if it has been a dwelling at any time in the 2 years prior to the chargeable event. Dwelling definition as per NRCGT ie: - a building used or suitable for use as a dwelling; - any building in the process of being constructed or adapted for use as a dwelling; and - the grounds in which such a building is situated and excluding care/ nursing homes, purpose-built student accommodation etc. Debts deductible only if they relate to the property eg mortgage does not appear that eg loan taken out to buy shares in property-owning company will be deductible. Loans between connected parties will be disregarded. 8

9 Inheritance tax on UK residential property (continued) Targeted anti-avoidance rule will counter any arrangements entered into to secure a tax advantage by avoiding the new charge. To aid enforcement of the new charge, property cannot be sold until any outstanding IHT is paid and liability will extend to directors of the company which owns the property. No reliefs against any tax charges arising on de-enveloping. 9

10 Deemed UK domicile for long-term residents: Income Tax and Capital Gains Tax From 6 April 2017 an individual will be deemed UK domiciled for all UK tax purposes once they have been UK resident for 15 of the previous 20 tax years. Deemed dom status can be lost by spending at least 6 years as a nonresident. Example: - X is a non-dom but has lived continuously in the UK since On 6/4/17 he will become deemed domiciled in the UK for all UK tax purposes. - X leaves the UK on 5 April 2018 and returns in May Assuming he retains his foreign domicile under general law, he would then revert to being non-dom for UK tax purposes until 5 April

11 Deemed UK domicile for long-term residents: Re-basing Those non-doms becoming deemed dom under the 15/ 20 year rule on 6/4/17 will be allowed to re-base their foreign assets to their market value on 5/4/17. This is a tax-free uplift: no tax on remittance etc (except to extent asset purchased with unremitted income/ gains). Only post 5/4/17 capital gains will be taxable. Re-basing only available to non-doms who have paid the remittance basis charge ( 30k or 60k) in an earlier year. Not available to those becoming deemed domiciled LATER than 2017/ 18. Only assets held as at 8 July 2015 will qualify (may change to 16 March 2016). 11

12 Deemed UK domicile for long-term residents: Re-basing example X is non-dom who has lived in the UK since In 2003 he purchases an offshore portfolio using 75k of taxable but unremitted foreign income. On 5/4/17 the portfolio is worth 250k, including 50k of accrued income. On 6/4/17 he becomes deemed domiciled under the 15/20 year rule. Between 6/4/17 and 1/12/17 income of 10k arises. He sells the portfolio on 2/12/17 for 215k and pays the entire proceeds into a UK bank account. X s tax position is as follows: - 75k original previously unremitted income charged to income tax in 2017/ 18-50k accrued income charged to income tax in 2017/18-10k income arising since 6/4/17 charged to income tax in 2017/ 18-15k capital gain arising since 6/4/17 charged to capital gains tax in 2017/ k remaining capital gain tax free 12

13 Deemed UK domicile for long-term residents: Cleansing of mixed funds Non-doms becoming deemed dom under the 15/ 20 year rule on 6/4/17 will be allowed to separate out mixed funds held offshore into their different parts (the cleansing rule) to facilitate tax-efficient remittances. For example, an offshore mixed fund consists of: - 1m clean capital; - 220k accrued foreign investment income; - 100k accrued foreign capital gains. Under existing rules, the first 320k remitted into the UK would be taxable. Under the cleansing rule, the 3 elements can be separated out and up to 1m remitted to the UK tax-free. Cleansing window will last until April Mixed funds held by offshore trusts and companies can also be cleansed. NB: future income/ capital gains taxable on an arising basis. 13

14 Deemed UK domicile for long-term residents: CGT protection for existing offshore trusts S86 TCGA 1992 taxes UK resident and domiciled settlors of offshore trusts on trust capital gains if settlor/ spouse, or their children/ grandchildren can benefit. For non-dom becoming deemed dom on or after 6 April 2017 s86 will NOT apply to trust capital gains where trust created before becoming deemed dom. However, exemption will not apply (ie s86 will apply as usual) if: - any property has been added to the trust since settlor became deemed dom, or - any benefits are received by settlor, spouse or minor children. NB: s87 TCGA 1992 (which taxes UK beneficiaries of offshore trusts) will not/ cannot by definition apply to deemed dom settlors. May change as a result of meetings between professional bodies and HMRC/ HMT. 14

15 Deemed UK domicile for long-term residents: income tax protection for existing offshore trusts Offshore settlements legislation (s624 ITTOIA 2005 et seq) and Transfer of Assets Abroad rules (s720 ITA 2007) tax a settlor of an offshore trust on income arising to trustees/ underlying companies if settlor is also a beneficiary. Non-dom settlors may currently use remittance basis to protect foreign income arising. A non-dom settlor becoming deemed non-dom on or after 6 April 2017 will not be taxable under the above rules on foreign income retained within the trust. (UK income will be taxable, as at present, on an arising basis.) Instead, foreign income will be taxable to the extent it can be matched with any benefit by settlor or any relevant person (defined as per remittance rules). Note proposed difference between income tax and CGT treatment: may change before legislation enacted. 15

16 Deemed UK domicile for long-term residents: Inheritance Tax 15/ 20 year deeming rule will also apply to inheritance tax from 6/4/17. (At present IHT deeming occurs in 17 th tax year.) But can lose deemed dom status by ceasing UK residence for 4 tax years (compared with 6 for other taxes) provided he remains non-resident. Example: - X becomes UK deemed domiciled on 6/4/17 for all tax purposes. - He leaves the UK on 5/4/ On 6/4/2025 he ceases to be UK deemed domiciled for IHT purposes for so long as he remains non-uk resident. - On 6/4/2026 X returns to the UK and is UK deemed domiciled for all UK tax purposes, including IHT, from that date. 16

17 Born in the UK with a UK domicile of origin From 6 April 2017 anyone born in the UK with a UK domicile of origin will be deemed UK domiciled if UK resident. For IHT purposes only, deeming rule will only apply if individual has ALSO been resident for at least 1 of the 2 previous tax years. If a period of residence included 10-year anniversary of trust established whilst non-dom, the TYAC is apportioned. - Eg: X is a non-dom born in the UK with a UK domicile of origin. He creates a trust in In 2018 returns to the UK and becomes deemed domiciled. In 2024 a TYAC will arise at 6/10ths of the statutory rate ie a maximum charge of 3.6%. X leaves the UK in 2033 and remains nonresident. There is no exit charge and there are no more TYACs. Re-basing election (to 5/4/17 MV) not available. A non-dom who becomes deemed domiciled under this rule can lose deemed dom status immediately by ceasing UK residence unless caught by the 15/ 20 year rule. 17

18 HMRC crackdown on offshore non compliance Derek Scott 5 October

19 The environment Step change in approach by HMRC to tackling non compliance Tax Amnesties are no more Being replaced by harsher regime- civil and criminal Focussed on taxpayers and enablers Underpinned by AEOI/CRS CDOT information exchange from 30/9/16 Final chance to take corrective action is now 19

20 What tax authorities want, in a word, is INFORMATION 20

21 Common Reporting Standard (CRS) In= International crackdown on tax evasion Impact though is much wider Automatic Exchange of Information Account values and income Bank accounts and interest in entities No distinctions for RNDs 21

22 CRS a new era Over 100 countries Early Adopter countries First reporting in 2017 (periods from 1 January 2016) Other countries First reporting in , eg UK Jersey, Guernsey, Isle of Man British Virgin Islands Cayman Islands Gibraltar EU India Liechtenstein 2018, eg Switzerland Singapore Hong Kong Israel Monaco China Russia UAE 22

23 Broader transparency issues Circa 50 countries to exchange details of beneficial ownership of trusts and companies Multi agency task force Panama papers Corporate Criminal Charge- Failure to prevent the criminal facilitation of tax evasion 23

24 Worldwide Disclosure Facility (WDF) Opened 5 September 2016 Disclose UK tax liabilities that relates wholly or partly to an offshore issue Income arising outside the UK Assets situated or held outside the UK Activities carried on wholly or mainly outside the UK Funds connected to a UK liability transferred outside the UK No immunity from prosecution No beneficial terms 24

25 Worldwide Disclosure Facility (WDF) Two stage process using HMRC s Digital Disclosure Service portal Notification Complete disclosure Within 90 days Pay tax, interest and penalties Non statutory clearance process for dealing with complex cases 25

26 Requirement to Correct (RTC) Any person with UK tax irregularities related to offshore interests has a new obligation to correct those liabilities by 30 September 2018 Not only evasion cases all non-compliance HMRC expect RTC will drive taxpayers to review their affairs and take advice to assure themselves their offshore interests are tax complaint Any person who is found to have failed to have corrected their affairs will be subject to a new set of sanctions for this Failure to Correct (FTC) Penalties in one proposal is minimum of 100% up to 200%, + Up to a 10% asset based penalty (cases over 25,000 tax), + A 50% additional penalty for seeking to avoid CRS/RTC, and Naming and shaming Only defence is someone had a reasonable excuse not to correct 26

27 Example Requirement to correct Mr X has undeclared income from an overseas investment portfolio with value of 7 million that has not been reported on his tax return for the last six years. This has equated to tax owing of approximately 100,000 per annum over 6 years Current Regime Tax due 600k Provided that the error was careless and was an unprompted voluntarily disclosed, no penalties will be due Failure to Correct Regime Mr X will still owe the 600,000 of tax Mr X will also have additional penalties of 100% (min) of the tax due 600,000 Additional penalties of 10% of the underlying asset 700,000 Mr X will be named and shamed 27

28 Example Cleansing a mixed fund Mrs B Has 10 overseas accounts Has been struggling to find clean funds to remit in recent years to fund her lifestyle Holds funds with a Swiss bank which she knows to be a mixed fund Has confirmed to tax advisor each year that she does not bring funds to the UK from this account Mrs B says she would like to take advantage of the new opportunity to cleanse the mixed fund. Mrs B is able to provide bank statements going back to 1 January MFAT 28

29 Example Cleansing a mixed fund Swiss bank account 10 underlying bank accounts Opening balance (6 April 2006) 10,000,000 Additions Interest and dividends 800,000 Offshore income gains 750,000 Capital gains 900,000 What was the original source? When were the funds originally deposited? What happened between original deposit and 2006? Does this include UK source income? Does this include UK situs assets? Were remittances made on the purchase of the investments? Withdrawals Transfers to other overseas accounts 500,000 Spending overseas 1,200,000 Transfers to the UK Nil Is Mrs B sure that nothing was remitted from the accounts that these transfers were made to? Has Mrs B ever purchased assets with these funds that were later brought to the UK? Closing balance (5 April 2016) 10,750,000 29

30 HMRC client notification programme Obligation on financial institutions (FI s) and professional advisers to notify specific clients of CRS and disclosure Must include a note prepared by HMRC, plus a prescribed statement. Can be by letter or Must send notifications by 31 August

31 UK property Discussion Paper March 2016 Beneficial Ownership details provided BEFORE acquisition of property To be provided for existing 100,000 titles as well? Sanctions for non provision of information Similar principles for entering into public procurement contracts PUBLIC 31

32 Private Eye Source: - September

33 Private Eye (cont.) Country Transactions British Virgin Islands 22,155 Jersey 20,590 Isle of Man 12,061 Guernsey 11,536 Mauritius 2,782 Gibraltar 2,657 Luxembourg 2,513 Panama 1,963 Ireland 1,957 Singapore 1,782 Other (122 named jurisdictions) 21,001 UK property acquired by offshore companies As a first step Land Registry to publish details of legal owners of UK property held by offshore company Source: - March

34 Client action & summing up Income and/or assets knowingly undeclared Take advice to disclose now Clients think everything is ok is it? RTC is a step change and consequences if no correction made when needed are significant Unless client has absolute certainty tax advice to gain reassurance is strongly recommended RTC/FTC extends to overseas trustees and company directors with UK tax reporting obligations 34

35 Spanish tax Alexandra Sanchez 5 October

36 Topics 36

37 Topics Spanish tax reform IHT-related changes in Andalucia Recent rulings on secondary adjustments related-party transactions Tax form

38 Spanish tax reform 38

39 Spanish tax reform Approved in 2014 in force since Personal Income Tax Rate reduction Corporate Income Tax Rate reduction Capitalisation reserve Limits on the offset of financial expenses and tax losses Budget deficit- Corporate Income Tax prepayments 39

40 IHT Andalucia 40

41 IHT Andalucia Improvements to IHT in Andalucia First phase approved in August 2016 Benefits concerning the inheritance of the habitual home of the deceased by close family members Benefits concerning the inheritance of farms Second phase to be approved in January 2017 and a 250,000-threshhold is expected to be introduced. 41

42 IHT Andalucia Habitual abode-related tax benefits : Before August 2015: 99.99% reduction up to the maximum limit of 122, per taxpayer and the property had to be owned during 10 years. Since August 2015: Minimum ownership requirement reduced to 3 years and reductions per the following scale: Net value of the property included in the Reduction taxable base of the tax payer % Up to 123, % Between 123, and 152,000 99% Between 152, and 182,000 98% Between 182, and 212,000 97% Between 212, and 242,000 96% More than 242,000 95% 42

43 IHT Andalucia Who is entitled to enjoy the above benefit? Heirs Spouses, ascendants, descendants or siblings (older than 65 years old) who lived with the deceased duringthe past 2 years. Is it applicable to non-resident heirs? Yes, provided: The heir is resident in the EU or in the EEA The deceased was resident in Andalucia. 43

44 IHT Andalucia A property valued at 1,000,000 inherited by two children Pre-August 2016: Net value 500,000 Reduction 122, Tax base 377, Post-August 2016: Net value 500,000 Reduction 475,000 Tax base 25,

45 IHT Andalucia A property valued at 10,000,000 inherited by two children Pre-August 2016: Net value 500,000 Reduction 122, Tax base 4,877, Post-August 2016: Net value 5,000,000 Reduction 4,750,000 Tax base 250,

46 Secondary Adjustment 46

47 Related-party transactions In April 2016, the Supreme Court questioned the application of secondary adjustments by the tax inspection authorities. Example of secondary adjustments Mr. X, a UK resident, is the sole shareholder of a Spanish Company, which, in turn, owns a Spanish property The property is for the private use of the shareholder The Company declared the following rental income inthe years inspected: Year Rental income 90,000 60,000 60,000 47

48 Related-party transactions The TA considered that the market value of the rent for 2011 and 2012 should have been 90,000. Thus, the following tax assessment was issued: Year Adjusted income - 30,000 30,000 Tax rate 30% 30% 30% Tax due - 9,000 9,000 In principle, there was no penalty imposed regarding the change in valuation of related-party transactions. However, the TA considered applying a secondary adjustment. In the case at hand, the secondary adjustment would entail deeming the adjusted income to be akin to a dividend distribution to the shareholder, which would be subject to WHT in Spain. 48

49 Related-party transactions In the case at hand, the UK-Spain Tax Treaty in force in the years audited provided for a limit of 15% in respect of WHT on dividends: Year Adjusted income - 30,000 30,000 WHT 30% 15% 15% Tax due - 4,500 4,500 Thus, no penalties were imposed, but the tax inspection ultimately charged an additional 9,000 Euros in withholding tax. The Supreme Courts have held that the TA may not apply this secondary adjustment across the board, but rather only where there is a transfer of income different to that that had apparently been obtained by the related parties. Moreover, the new CIT Law provides for the possibility of voluntary payment of the difference in valuation so that this secondary adjustment is not applied. 49

50 Tax form

51 Tax form 720 Who has the obligation to report? Spanish tax resident individuals and companies Spanish PEs of non-resident entities or individuals Partnerships, undistributed estates, owners associations 51

52 Tax form 720 When they are or have been during the previous year: Legal titleholders, agents, authorized persons, beneficiaries, persons with powers of disposal or beneficial owners. Of any of the following groups of assets and rights: Accounts held in financial institutions located abroad. Values, rights, insurance and income deposited, managed or obtained abroad. Real estate and rights to real estate located abroad. 52

53 Tax form 720 NO OBLIGATION TO FILE when: The value of each of the groups (considered individually) does not exceed 50,000 Once the first tax form has been filed, each group (considered individually), even where it exceeds 50,000, where such value has increased by no more than 20,000 in comparison with the previous mount reported. Specific penalty regime under the GTA. Where unreported unjustified capital gain 53

54 Tax form 720 THE EUROPEAN COMMISSION HAS INSTITUTED INFRINGEMENT PROCEEDINGS AGAINST SPAIN: The imposition of disproportionate penalties for late filing of this return, as compared to the regulatory penalties applicable to domestic tax infringements; The setting in place of a different and longer statute-of-limitation period, which, in the case of unjustified capital gains, exceeds the generally applicable 4-year term, as any such gains must be attributed to the last non-statute-barred year, subject to an additional penalty of 150%. 54

55 VAT Update Sandra Skuszka 5 October

56 Agenda VAT implications of Brexit EU moves towards VAT applicable where consumed Other VAT news 56

57 VAT implications of Brexit

58 VAT implications of Brexit With the United Kingdom s departure from the European Union, one of the European Union s fundamental freedoms will come to an end, namely the free movement of goods, and export businesses will face traditional border formalities. 58

59 Supplies of Goods B2B Current position - Buyer declares VAT on VAT return After Brexit Seller or Buyer is responsible for import VAT and Duty 59

60 Supplies of Goods B2C Current position - Supplier declares VAT in UK up to distance selling threshold After Brexit Seller or Buyer is responsible for import VAT and Duty 60

61 Supplies of Services B2B Current position Intra- EU supply Buyer declares VAT on VAT return After Brexit Export by UK supplier/import by EU Buyer Buyer Declares VAT on return 61

62 Supplies of Services B2C Current position UK seller charges UK VAT. Has to register in Customers country or under MOSS if electronically supplied services After Brexit Export by UK Seller. Has to register in Customers country or under MOSS if electronically supplied services 62

63 VAT implications of Brexit UK suppliers of goods could be hit with the cost of filing an export document in the UK, shipping documentation and filing an import document in the EU. EU suppliers sending goods to the UK will be hit with the same costs. Based on figures for 2015, UK exports to the EU amounted to EUR billion, while at the same time its imports from the EU amounted to EUR billion. 63

64 EU moves towards VAT applicable where consumed

65 EU moves towards Point of consumption In April the EU Commission presented plans to modernise the VAT system in Europe. The main aim of the changes is to tackle fraud an support businesses providing digital services and e-commerce. The VAT gap in Europe is now estimated to be 50 Billion Euros. Aim to improve co-operation between tax administrations including non-eu countries. A Directive on mutual assistance to recover VAT debts. A definitive VAT system where the VAT applies where consumed and the supplier collects the VAT. 65

66 EU moves towards Point of Consumption KPMG have produced a paper on Don t underestimate BEPS impact on indirect tax. BEPS Action 1 VAT should be imposed in jurisdiction of destination. For B2B transactions the consumer should self assess the VAT in cross-border transactions. For suppliers of goods online considering the supplier having to account for the VAT once certain thresholds have been reached. 66

67 UK VAT on Advertising services UK proposals to charge VAT on advertising services where used and enjoyed in the UK. Consultation document is in draft but has not been released. 67

68 Other VAT News

69 Other VAT news HMRC have replaced the notice on refunds of VAT in the European Community for EC and Non-EC businesses (VAT notice 723A). HMRC have replaced VAT Notice 701/29 Betting, gaming and lotteries. Customs and Revenue Brief 14 Deduction of VAT on pension fund management costs following the CJEU decision in PPG. Customs and Revenue Brief 11 Explores the question can a UK business being transferred to a company is not currently registered for VAT in the UK be treated as a transfer of a going concern? 69

70 Other VAT news HMRC Guidance on overseas businesses and joint and several liability for online market places. HMRC Consultation - Making Tax Digital an overview for smaller businesses (closes 7 November 2016). HMRC Consultation Tax treatment of free plays in Remote Gaming Duty (Closes 17 October 2016). 70

71 Gibraltar Update Darren Anton 5 October

72 A Quick Reminder of Changes for companies: Income Tax (Amendment) Act 2015 All companies that are registered in Gibraltar or that have assessable income must make a full and complete return of their income Applies to accounting periods ending on or after 1 January 2016 New CT1 form ITO guidance provided on accounts that need to be submitted with the CT1 Every company incorporated in Gibraltar that declares a dividend must prepare and deliver a return to the Commissioner Does not apply to any company whose shares are listed on a recognised stock exchange Applies to accounting periods ending on or after 1 January 2016 New dividend return and ITO guidance with examples to be published If recipient is a Gibraltar ordinarily resident shareholder or another company incorporated in Gibraltar then particulars relating to the dividend must also be provided to those shareholders To be delivered no later than 9 months after the accounting period 72

73 Gibraltar Budget 2016: Tax Individuals ABS Deduction for first child increases from 1,100 to 1,105 Nursery School Allowance increases from 5,000 to 5,025 (per child) Blind Person s Allowance increases from 5,000 to 5,020 Disabled Individual s Allowance increases from 9,000 to 9,040 Single Parent Family Allowance increases from 5,264 to 5,290 Personal Allowance increases from 3,200 to 3,215 Spouse Allowance increases from 3,200 to 3,215 The minimum wage increases very slightly No increase in Social Insurance contribution rates but to be reviewed on 1 January 2017 and a new system of SI to be introduce Tax amnesty for undeclared overseas income extended for further 6 months from 5 July 2016 but with an increase in the rate to 7.5% (previously 5%) No announcement on changes to the Category 2 or HEPSS regimes Tax assessments being brought further up to date this year and ITO moving to digitalisation 73

74 Gibraltar Budget 2016: Tax Companies New Start Up Incentive For companies (and limited partnerships) New business set up in Gibraltar between 5 July 2016 to 30 June 2017 Must employ at least 5 people in first year First three financial years of trading eligible for a tax credit equal to the tax due up to a max. of 50k over each of the first three years (= 500k of taxable profits per annum) No increase in utilities and business rates Tax for telecoms companies Previously paid tax at 20% on all income To ensure level playing field 10% tax rate on income generated from nontelecoms services, eg data centres Credit does not carry forward and no repayment by ITO Anti-avoidance provisions eg must be a new business 74

75 Gibraltar Budget 2016: Tax Import duty Goods Previous Rate (%) New Rate (%) Sanitary towels 12 0 Nappies 3 0 Shaving, deodorants, bath preparations 3 0 Spare parts for fish finders 12 0 Sails 3 0 Propellers 12 0 Spectacles 6 0 Contact lenses 12 0 Satchels

76 Gibraltar Tax: Other Property Investment Incentive For owners of property constructed in Gibraltar From 1 July 2016 for 30 months Rented for residential purposes Tax credit available equal to the tax payable on the profits earned on the first 24 months of rent arising in first 5 years after completion of the construction Not refundable by ITO 76

77 Gibraltar tax: Tax Rulings Decision recently published by the EU Commission on the investigation into Gibraltar s tax ruling process (165 tax rulings out of 340 up to 31 August 2013) S42 ITA 2010 clearances in advance procedure (?) EU Commission conclusion ITO grant tax rulings without performing adequate evaluation of each companies business ITO consistently misapplies the provisions of the ITA 2010 eg minimal income/activity Systematic non-enforcement of the conditions of the tax ruling by the ITO eg monitoring 165 tax rulings/the administrative tax rulings practice = new State Aid (selective advantages) Doubts on compatibility with EU internal market UK view (as Member State): Not always necessary to have a full description of the activity and instead an understanding of transaction/event is required Local knowledge sufficient to determine and monitor Wide variety of situations so no selectivity ITO not enough expertise/resources in certain areas to conduct sophisticated review Sufficient evidence should be provided in first letter and tax rulings are conditional One month for comments (Finance Centre announcement) and then a future recovery? 77

78 Questions? 78

79 Thank you Presenters contact details Darren Anton Gregory Jones Derek Scott Alexandra Sanchez Sandra Skuszka The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thoroughexamination of the particular situation.