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    Please provide as much detail as possible in regards to the reason for your enquiry so our tax advisers can prepare and tailor their response to reflect your needs. We will endeavour to - respond / call you back - to discuss your enquiry and you will not be charged for this time.

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  • Budget 2016: Property development – Osborne puts a stop to the property development tax treaty ‘shop’

    18 March 2016

    Andy Wood

    A non-UK company is only subject to corporation tax on a UK based trade or from profits attributable to a Permanent Establishment (PE).

    This meant that if a non-UK resident property developer could arrange his or her affairs such that they avoided a PE in the UK (for example, a site office or show-home) and are resident in a jurisdiction with a favourable treaty they could avoid tax in the UK.

    Of course, it may well have been the case that the non-UK resident developer was based in a jurisdiction with a low (or nil) rate of tax!!!

    Legislation is to be introduced which will remove the PE requirement when determining whether a corporation tax charge will apply. This will be beefed up by a targeted anti-avoidance rule (TAAR);

    A period of consultation will open up in due course.

    There will need to be changes to the some of the UK’s tax treaties as a consequence.

    This has always been a rather complex area of tax legislation and it seems likely that this will add to, rather than relieve, that positions. In some cases, it can be a fine between whether a particular transaction is trading play or an investment.

    Furthermore, there are already existing anti-avoidance provisions including:

    • transactions in land rules; and
    • potential for charges to Diverted Profits Tax.

    It is difficult to identify good arguments against the extension of the corporation tax charge. So fine. But I do wonder whether at some stage the Government may look again at limitations on capital gains tax for non-UK residents.

    These rules do not effect the position of non-UK investors.

     

    If you or your clients are affected by these changes then please get in touch

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