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EC formal request for the UK to amend its anti-avoidance legislation

On 6 December it was announced that the UK is planning to change two key anti-avoidance provisions: the rules governing transfers of assets abroad and the attribution of gains made by non-resident companies. Apparently proposals will be published for consultation around the time of Budget 2012 with a view to enactment in the 2013 Finance Bill.

The reason for this is that, in February 2011, the EC announced that the existing UK legislation infringed the EU Treaty. The issue is that the law discriminates by taxing the shareholders of a non-UK resident company on the income and gains made by that company for shareholders of a UK resident company. 

The change may have a marked effect on tax planning in that individuals could be entitled to establish a company, including one holding investments, to take advantage of lower corporation tax rates available in some other states in the EU or EEA. In reality, this type of planning is likely to be undertaken only by wealthy individuals because of the costs involved in establishing a company properly. 

The question really though is how far HMRC will go in changing the UK law. Historically it has made only minor changes in these circumstances. It has a strategy of taking a strong position on where to draw the line. We will have to wait – and hope.

Cathy Corns

Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552.

Email Cathy Corns



Date: 6th February, 2012
Author: Cathy Corns


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