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The Chancellor’s Budget delivered to Parliament on 8 July 2015 contained a number of announcements relevant to EU claims and cross border transactions, including:

Retrospective Protection for HMRC from Interest on Unpaid Judgment Debts

Effective on and after 8 July 2015, the normal rate of interest paid by judgment debtors on unpaid judgments (8% p.a.) will no longer apply to HMRC. Instead HMRC will only be required to pay the Bank of England base rate plus 2% p.a. simple when it does not pay a judgment when due. This will apply even to pre-existing debts. HMRC’s special rate is set at below the rate established in the FII and Littlewoods litigation as commensurate with the minimum remedy required by EU law for interest upon repaid VAT and other taxes levied in breach of EU law.

Permanent Non-Dom Status Abolished

Permanent “non-dom” status will be abolished from April 2017. From that date, anyone who has been resident in the UK for 15 of the past 20 years will be deemed UK domiciled for tax purposes. In addition, those who had a domicile in the UK at the date of their birth will revert to having a UK domicile for tax purposes whenever they are resident in the UK, even if under general law they have acquired a domicile in another country. A detailed consultation document on the proposals will be published after the summer recess and a further consultation will follow on the draft legislation which is intended to form part of the 2016 Finance Bill.

Twinned with this is the announcement that the government intends to bring all UK residential property held directly or indirectly by foreign domiciled persons into charge for inheritance tax purposes, even when the property is owned through an indirect structure such as an offshore company or partnership.

Some Other Provisions
(2) losses and surplus expenses of the current year, and
(3) losses and surplus expenses arising in other group companies (group relief).
According to HMRC’s Tax Information and Impact Note, the measure will also amend the rules restricting the use of carried forward losses in Part 14B of CTA 2010 (“tax avoidance involving carried-forward losses”) to “put beyond doubt” that they apply to arrangements involving CFCs.
(2) HMRC will open a time-limited disclosure facility in early 2016, but on tougher terms than the previous offshore disclosure facilities HMRC have operated.
(3) If non-compliant taxpayers continue to conceal their tax affairs, HMRC will enforce tough penalties for offshore evasion through the existing offshore penalty regime, new civil penalties for tax evaders and the new simple criminal offence for failing to declare taxable offshore income and gains.
HMRC will informally consult the professionals affected to develop communications including the points above. Regulations will be made after Royal Assent and after the informal consultation has concluded and are expected to have effect from early 2016.
The Summer Finance Bill 2015 will be published on 15 July 2015.

• Legislation will be introduced to stop losses and other surplus expenses from being set off against the CFC charge on the profits of controlled foreign companies. The measure is intended to prevent the use of the following types of expenses against a CFC charge: (1) losses and surplus expense brought forward from previous years;
• In the 2014 Autumn Statement the Chancellor announced the abolition of the residence rule in consortium relief (which took account of the decision of the CJEU in Case C-80 Felixstowe Dock and Railway Co Ltd), but the changes to the legislation were dropped from the Finance Act 2015. The legislation will be introduced in the Summer Finance Bill 2015 and will have effect for consortium relief claims to group relief for accounting periods beginning on and after 10 December 2014.
• The government will consult on new measures to increase compliance and “tax transparency” in relation to large business tax strategies. These will include the introduction of a “special measures” regime to tackle businesses that persistently adopt “highly aggressive” behaviours including around tax planning, and a voluntary Code of Practice defining the standards HMRC expects large businesses to meet in their relationship with HMRC.
• A package of measures has been announced to tackle offshore tax evasion. The government will take a power in legislation, to have effect on and after the date of Royal Assent to the Summer Finance Bill 2015, under which financial intermediaries, tax advisers and other professionals will be required to notify their customers or clients that: (1) The UK will begin to receive information on offshore accounts in 2017 and will begin to share information with other tax authorities on accounts held in the UK.
• The government will also launch a consultation on the detail of a new General Anti-Abuse Rule penalty.

This article appears in the JHA July 2015 Tax Newsletter, which also features:

1. ITC v HMRC: Decision on Permission to Appeal
2. Supreme Court judgment in Rank: VAT on Gaming Machines by Katy Howard
3. Anson v HMRC – Double Taxation Relief by Christopher Boughton