UK Government Will Amend Anti-Avoidance Legislation

UK Government Will Amend Anti-Avoidance Legislation

British government is consulting on the amendments to domestic anti-avoidance tax legislation deemed discriminatory by the European Commission as it provide different tax regimes for domestic and cross-border transactions.

The amendments planned concern two provisions of UK legislation aimed on preventing transfer of assets abroad to avoid UK tax.

One of those provisions states that if a UK resident individual invests in a company incorporated or managed in another European Union member state transferring assets, this resident individual is liable to pay tax on the income derived by that company. But if the same resident individual invests in a UK-based company, the income of that company is subject to tax only on the level of the company.

The other provides the following regime: when a UK resident company holds more than a 10% share of an EU member state registered company, and this EU company derives capital gains from selling assets, these gains are attributed to the UK company according to the UK tax legislation. Than means the UK company becomes liable for corporation tax on these gains in the UK. However, if a UK company invests in another UK company, such gains are taxable only on another UK company’s level.

Last February the European Commission forwarded an official request to the UK for amending legislation and adjusting it in accordance with EU single market principles

During consultation the government intends to gather views from tax professionals and consultative bodies, and also from those who are interested in anti-avoidance legislation, on the base of which the amendments proposals to be worked out.

The consultation is open for commenting till October 22.

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