Three weeks to 18 April 2019
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
EU State aid - aspects of UK CFC rules found to be illegal State aid
On 2 April 2019, the European Commission (EC) issued a press release stating that they have found that the UK Finance Company Partial Exemption (FCPE) that exempted (or partially exempted) certain multinational groups from the general UK CFC rules is illegal State aid. We still await the publication of the full decision. The UK must now recover the illegal State aid from the multinational companies that benefited from it. Follow developments on this topic on our EU State Aid - UK CFC hub, where we’ll be providing practical insights on the implications of this EU State case aid and how the affected businesses can respond to the EC decision. See further below in our EU section.
First Tier Tribunal rules UK’s intra- group asset transfer rules violate EU law
A First Tier Tribunal (FTT) has held that the imposition of an immediate corporate tax liability on capital gains arising on a transfer of assets by a UK company to its Dutch parent company, denying the no gain / no loss treatment available (under s171 TCGA 1992) to transfers within a UK group, is a disproportionate measure that violates the EU right to freedom of establishment. The Tribunal considered requiring payment of the tax by installment would be a proportionate measure in such a scenario, but would go beyond what it is appropriate for a Court to read down into the existing legislation. It therefore reluctantly felt obliged to disapply the requirement in s171 TCGA that the transferee be within the charge to UK tax, with the result that the transfer would take place at no gain / no loss (even though there is no mechanism to impose a UK tax charge on the eventual disposal of the asset by the Dutch parent). A transfer by a UK subsidiary of a Dutch parent to its sister subsidiary in Switzerland was also considered in this case, but in that scenario the imposition of an immediate tax charge was found not to be contrary to EU law because the same result would have arisen had the parent company been UK rather than Dutch resident. We are waiting to hear whether, as expected, this decision is to be appealed. Read the decision here.
Important changes affecting non-residents disposing of interests in UK property
New rules take effect from 6 April 2019 extending the scope of UK tax on gains. These changes also give rise to new notification/filing obligations. Read more.
