By Doug Connolly, Multinational Corporate Taxation
On July 20, the UK released a bill for the 2021-22 Finance Bill to create an uncertain tax treatment notification requirement for large businesses and to change the tax rules for hybrids and the like. asymmetries, among other measures. The tax proposals are open for consultation until September 14 before being tabled in Parliament.
The bill would also add provisions to crack down on tax evasion promoters. Other business tax proposals in the bill include measures on the taxation of asset holding companies in hedge fund structures, real estate investment trusts and depreciation allowances.
The rules on uncertain tax treatment would require large companies to notify HMRC if they adopt uncertain tax treatment with respect to returns filed on or after April 1, 2022. For this purpose, large companies are defined as those with a figure of d business is over 200 GBP. million per year (approximately $ 275 million) and a balance sheet total of over Â£ 2 billion (approximately $ 2.75 billion).
The bill defines uncertain tax treatments as positions that meet at least one of the three conditions. Generally, a tax treatment would be considered uncertain if the taxpayer has made a provision in its accounts to reflect the likelihood that a different tax treatment will be applied, if the treatment deviates from a position stated by HMRC, or s ‘There is a possibility that the tax position adopted by the taxpayer will be overturned by a tribunal or court.
Uncertain tax treatments below a threshold of Â£ 5million (approximately US $ 6.9million) would be exempt from the requirement. There is also an exemption for certain transfer pricing calculations. A penalty of 5,000 GBP (approximately 6,900 USD) would apply for failure to notify.
The uncertain tax treatment notification requirement bill follows a consultation on the proposed requirement held earlier this year.
The modification of the hybrid regime would modify part of the rules aimed at combating asymmetries related to payments to hybrid entities in order to ensure a proportionate result when certain entities are considered transparent in their home jurisdiction. To this end, the amendment would treat certain transparent entities located outside the UK that are considered transparent in their home country – for example, US limited liability companies – in the same way as partnerships to ensure that the compensation provision is working as intended.