Overview of Anti-avoidance Tax Legislation 2014

This article summarises tax changes to be legislated in relation to Anti-avoidance in Finance Bill 2014 and/or other legislation, including secondary legislation having effect in 2014-15.

Offshore employment intermediaries –

As announced in Budget 2013 and following consultation, legislation will be introduced in Finance Bill 2014 to strengthen obligations to ensure the correct income tax and National Insurance contributions are paid by offshore employment intermediaries. These changes will have effect from 6 April 2014.

Onshore Employment Intermediaries: False self-employment –

As announced at Autumn Statement 2013, legislation will be introduced in Finance Bill 2014 to prevent employment intermediaries being used to avoid employment taxes and obligations by disguising employment as self-employment. Following consultation, the legislation has been revised to incorporate a number of small changes to address some of the concerns raised. A Targeted Anti-Avoidance Rule has also been introduced. These changes will have effect from 6 April 2014.

Partnerships –

As announced at Budget 2013, and following formal consultation over the summer, draft Finance Bill 2014 legislation was published for consultation at Autumn Statement 2013, alongside a consultation response document and a Technical Note, setting out the Government’s proposals to counter:

• the disguising of employment relationships (and consequential reduction of employment taxes) in relation to salaried members of Limited Liability Partnerships (LLPs);

• tax-motivated allocations of business profits or losses in partnerships (not just LLPs) where the partners include both individuals and companies (mixed membership partnerships); and

• tax-motivated disposals of assets through partnerships.

Accelerated payment in tax avoidance cases –

As announced in Autumn Statement 2013, legislation will be introduced in Finance Bill 2014 to change tax administration to require taxpayers who have used avoidance schemes which are defeated in another party’s litigation, and who do not settle the dispute, to pay the disputed amount to HMRC on demand.

Avoidance schemes involving the transfer of corporate profits –

Legislation will be introduced in Finance Bill 2014 to prevent companies from obtaining a corporation tax advantage by transferring profits between companies within a group. The legislation will provide that where as part of tax avoidance arrangements a company transfers all or a significant part of its profits to another group member, then the company’s profits will be taxed as though the transfer had not occurred. These changes will have effect for any transfer of profits made on or after 19 March 2014. A TIIN is available at Annex A.

Review of loan relationships and derivative contracts –

Following consultation, the Government will shortly issue a Technical Note setting out proposed changes to make the corporation tax rules on loan relationships and derivative contracts simpler, more certain and more robust against avoidance. As part of these changes, legislation will be introduced in Finance Bill 2014 in two areas.

First, both profits and losses will be brought into account for tax purposes when a group transfers a loan or derivative contract to a company, which subsequently ceases to be a member of the group (currently losses are not normally brought into account). These changes have effect where the cessation of membership of the relevant group occurs on or after 1 April 2014. A TIIN is available at Annex A.

Second, changes will be made to the rules in Chapter 3 of Part 6 of Corporation Tax Act 2009, concerned with the taxation of certain collective investment vehicles, to enhance existing anti-avoidance provisions and to clarify aspects of the operation of the rules. These changes have effect in relation to accounting periods beginning on or after 1 April 2014.

Legislation, previously intended for inclusion in Finance Bill 2014, to clarify and rationalise the taxation of loan relationships and derivative contracts held by a partnership will now be deferred to 2015.

Autor: Lora Sivova, PhD

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