The British Government’s efforts to make the UK tax system “fit for purpose” in the 21st century generally seem to be continuing apace. However, in some areas, at least, the pace has slackened a little. Given the complexity and range of what was proposed last summer, it is perhaps not a surprise that the timetable for “modernising” the corporate debt and derivative contract rules has slipped somewhat. The election permitting, the Finance Act 2015 will be the one to watch on this front.
It seems, however, that the regime for the oil and gas industry is now likely to be next up for “modernisation” and it will be interesting to see if, this time around, more progress is made than the last Labour Government’s ill-fated attempt to introduce greater “fairness” through a review of this regime.
Of perhaps wider interest (not least to the 33,000 taxpayers in dispute over £5.1 billion of tax) will be the introduction of a “notice to pay” and a “follower notice” which are both indicative of a much more aggressive approach from HMRC. Challenge, be it on Human Rights grounds or by means of Judicial Review seems almost inevitable, and it will be interesting to see how any proposed changes in these areas of law (as, for example, heralded by the Government’s controversial Autumn 2013 consultation on the further reform of judicial review) will bear on the management of tax disputes.
Although the BEPS policy document published by the Treasury to accompany the Budget reads at times like a slightly smug injunction to the OECD to follow the British Government’s model approach to stemming tax avoidance, elsewhere there are signs of a recognition that transfer pricing, which forms such an important plank of the OECD platform, may have its limitations. The new restriction on relief for the cost of certain bareboat charters in the oil and gas sector and the technical paper published to accompany the new rule against the transfer of profits within groups of companies (e.g. by means of royalty flows or franchise arrangements motivated by tax avoidance) suggest that HMRC believes a new addition to its tool kit is required. It will be interesting to see if these new rules suffice to appease Margaret Hodge and the Public Accounts Committee, but they seem bound to add another layer of complexity (as well as greater uncertainty) for the Finance Directors of corporate groups.
Those advising professional partnerships may, a little ruefully, albeit with very little surprise note that the House of Lord’s recent call to delay the introduction of the salaried members rules has fallen on deaf ears. Members of a LLP, modern though their LLP might be thought to be as a child of this century, are also now firmly on a road back to a pseudo-partnership future.