UK Business Tax Road Map

18.03.2016 News

Yesterday was Budget Day in the UK, announcing the detailed measures to be brought forward for enactment in this year’s Finance Act.

The major changes to the business tax system have been set out in a roadmap (attached). But to point you towards some of the general highlights:

·         Reduction of the corporation tax rate to 17% from 1 April 2020 (currently 20%)
·       Wholesale adoption of BEPS Actions, including those on hybrids, interest deductibility, harmful tax practices (so, introduction of the modified nexus to the Patent Box regime), and treaty abuse
·         Restrictions on carried forward loss utilisation
·         Adoption of the revised, post-BEPS Transfer Pricing Guidelines into UK legislation

The UK Government has furthermore announced that it intends to extend the scope of the UK anti-hybrid rules to automatically disallow UK corporation tax relief in respect of payments to exempt foreign branches.

It seemed clear that the initial draft of the UK anti-hybrid rules were not intended to apply to the branch structure, but there has now been a clear change of Government policy on this issue.  This represents a significant expansion of the UK rules implementing BEPS Action 2.  This change will be included in the Finance Bill 2016 and will take effect from 1 January 2017.