Chancellor of the Exchequer Philip Hammond has apparently acquired the nickname in parliamentary circles of “Spreadsheet Phil.” This is suggestive of a man who likes to play around with numbers. A lot. Not the best company at parties, perhaps. A meticulous planner maybe, not given to spontaneous policy announcements. Except that he kind of is. His first Budget as Chancellor was marked by dramatic about-turn on self-employment taxation, and his latest Budget, announced October 30, by a digital services tax, set to commence in 2020. Incidentally, Hammond moved Budget day forward by one day so it wouldn’t be announced on October 31 – Halloween – and suffer a pun-fest at the hands of the media. As it turned out, the 2018 Budget was largely free from tax horrors. But many businesses will surely have been a least a little bit … Read More »
As far as taxation goes, preparation and planning have long been integral to a successful business or investment strategy, no more so than in today’s post-BEPS, uber transparent world. The tax headlines are littered with seemingly well-prepared companies with well-staffed tax departments, embroiled in long, expensive disputes with the tax authorities. So woe betide any taxpayer who jumps into the world of international trade and commerce without having given thought to the tax consequences.
However, sometimes taxpayers can find themselves in an impossible position, planning for outcomes that are unknown. In Europe, both the United Kingdom and the European Union have been urging businesses to prepare for the possibility of a no-deal Brexit. Which must be a bit like asking them to plot a course on a map which has had all the names of the roads, towns, and cities deleted. … Read More »
We all know that corporate taxation entails more than just a simple percentage of a company’s profits; it is far, far more involved than that. The 15 weighty tomes that are the final reports of the base erosion and profit shifting project – the fruits of the OECD’s countless hours of labor – are a testament to that.
At the heart of it all is transfer pricing. But, mention the phrase “transfer pricing” to the uninitiated, and they will probably return a blank, bovine stare, almost puppy-like in its wide-eyed, head-slightly-tilted innocence. You’d almost see cartoon-esque question marks forming in their eyes. Start to talk about transfer pricing to them for any length of time, and you might be in danger of losing a valued friend or acquaintance (“where’re you going? I haven’t finished explaining the comparable uncontrolled transaction method yet!”). … Read More »
Taxpayers in Brazil might have been a little alarmed when they read the headline “UK Chancellor mulling Amazon tax.” Brazil has a complicated enough tax regime already, as the International Monetary Fund observed again earlier this month, without other countries adding their two cents to the already mind-bogglingly complex equation.
Obviously, Philip Hammond was talking about Amazon the company, not the Amazon river (although both share the distinction of being extraordinarily large). Nevertheless, given the subject matter and the UK Government’s intent, his words would have reverberated globally, perhaps even as far as the upper reaches of the Amazon. The river, that is. Though no doubt the upper reaches of Amazon’s management structure are well aware that governments and tax authorities the world over are circling, hungry for a piece of the pie.
Indeed, in Amazon’s home country, states have quickly capitalized … Read More »
The UK has eased the tax shackles on small-time “digital entrepreneurs,” with the introduction also of a similar “sharing economy tax allowance.”
However, another more recent initiative to encourage compliance with UK VAT rules among online marketplaces and those that use them has got off to a less-than-auspicious start, and it’s not difficult to see why.
The new scheme is intended to allow online marketplaces to demonstrate their support for the proper collection of VAT. However, the honor of having their name on a list of VAT-compliant marketplaces involves some fairly extensive requirements. These include supplying HMRC with information on marketplace sellers, including, at a minimum, a sellers’ identity; the value and volume of sales of each seller; and the sellers’ contact details. This is in addition to educating sellers about their UK VAT obligations and responding to any evidence of non-compliance. In … Read More »
If you’re worried what the future holds as we draw nearer to an era of artificial intelligence – more automation, and fewer humans running the show – then you’d better worry about it a bit more. The robots are already here, and they might be processing your tax return right now.
At least, that could be the case if you live in the United Kingdom, where HM Revenue and Customs made the rather startling revelation earlier this month that it has been using artificial intelligence since 2015, and it has processed 10 million transactions already. Creepier still if this is the sort of stuff gives you the willies, HMRC’s Chief Digital & Information Officer said that the tax office uses “robots” to undertake a multitude of albeit mundane administrative tasks! Robots!
Now, I don’t think we’re talking your classic “Metal Mickey”-type automaton here, … Read More »
Ordinarily, you wouldn’t expect to see companies and investors flow from a low-tax jurisdiction to a high-tax one (although, in the complex world of international finance, it often does in a roundabout kind of way). But sometimes, water can be seen flowing uphill too. In this case, from the United Kingdom to Italy.
The UK isn’t exactly a low-tax jurisdiction. But when compared with Italy, it’s a fiscal paradise. In the World Bank’s ease of doing business index, the UK is positioned 7th out of 190 jurisdictions, with Italy trailing in 46th. Narrowing the comparison down to just tax, and the gap gets significantly wider: the UK is 10th, and Italy is down at 112th. So not exactly the most logical move for a business or investor.
Yet, according to a senior official in the Italian finance ministry, those from the UK … Read More »
HM Revenue and Customs is a revenue authority I don’t feel at all sorry for, after it lost a case recently regarding its powers to tax those who have long since left British shores to pursue a life in greener pastures.
The somewhat unique and often vague concept in British law of tax domicile, which exists alongside tax residence, has probably muddied the waters sufficiently to embolden HMRC to go after those living abroad even when they have only tenuous links with the UK. But it has possibly made the tax authority a little over confident in its claims to tax both British expats and foreign-born individuals who have spent time living, working, and investing in the UK but no longer have ties there. So, in an age when some officials don’t seem to think twice about exercising their powers extra-territorially, the High … Read More »
The United Kingdom tax authority has been accused of going after low-hanging fruit in its quest to narrow the tax gap. Accountancy firm UHY Hacker Young reported last month that HM Revenue and Customs collected almost GBP500m (USD660m) in additional revenue from its compliance investigations in 2016/17, a five percent increase over the previous year. And Roy Maugham, a tax partner at UHY, is clear that HMRC is focusing its compliance activities on small firms because they are “an easier target than many larger businesses.”
He also emphasized that such audits can have a disproportionately detrimental effect on these taxpayers. “The cost of tax inquiries for SMEs can be high, and the investigations disruptive,” he noted, adding: “Small companies may not have the necessary resources to bounce back.”
Maugham suggested that the best way for small business to avoid being in HMRC’s … Read More »
Diageo’s recently published annual report was revealing for a couple of reasons. First, it showed how large multinational companies are more often than not embroiled in at least one tax dispute across the many jurisdictions in which they operate.
Second, in Diageo’s case, one of these tax disputes concerned the United Kingdom’s Diverted Profits Tax (DPT). And this development was interesting because this was one of the first times that the UK tax authority, HMRC, has assessed DPT against a company.
The next development of interest will be what happens next in this dispute. And doubtless other multinationals with potential exposure to this charge will be keenly watching how it unfolds, with a view to strengthening their own defences against the tax. However, they’ll need a long attention span. Because under the DPT legislation, after a taxpayer is issued with a DPT payment notice … Read More »