Avoidance

The government has announced plans to restrict the use of the compensating adjustments mechanism in the transfer pricing legislation where it generates income tax advantages.

HMRC are aware of two major schemes that exploit the rules. The first arrangement involves large partnerships that employ staff through a separate service company, which the partnership owns.

R Smith (TC2768)

HMRC have confirmed they will withhold income tax repayments when officials believe a claim that produces the sum constitutes avoidance, and when the department is challenging or considering challenging claims by enquiry.

The Revenue will make an appropriate provisional refund if it agrees a claim does not depend on avoidance. If the department’s view is that the effect of a scheme was to inflate or accelerate a claim to relief artificially, officials will work with taxpayer and agent to make an appropriate provisional repayment to reflect the portion not in dispute.

HMRC have launched a challenge to arrangements used by contractors and other professionals to mitigate tax by entering into a contract of employment with an offshore employer while providing their services in the UK.

Participants receive a substantial proportion of the fees for their services in payments said to be loans. The Revenue does not agree that the arrangements succeed in avoiding tax.

But questions remain over OECD base erosion plan, says expert

Peninsular & Oriental Steam Navigation Company (TC2725)

The Revenue has moved to clarify its approach to tackling stamp duty land tax (SDLT) dodging.

The department’s action follows a meeting between the British Property Federation, the Chartered Institute of Taxation, the Law Society, the Stamp Taxes Practitioners’ Group and HMRC Stamp Taxes, to discuss SDLT group relief and the application of the targeted anti-avoidance rule in FA 2003, Sch 7 para 2(4A), in the context of intra-group asset transfers following corporate acquisitions.

Scotts Atlantic Management Ltd (in members’ voluntary liquidation) and others (TC2704)

It is a misconception that changes to professional guidance have a place in the fight against abusive avoidance

The proposals for introducing the automatic exchange of information between UK sovereign tax havens and HMRC

Think carefully about the costs, advises Revenue

DV3 RS Ltd Partnership v CRC, Court of Appeal