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Deep within the press notices accompanying both the budget and pre-budget review has in the past been a likely place to announce retrospective changes limiting claims for the recovery of tax or changes responding to ECJ decisions. Examples include the changes following Cadbury Schweppes, Marks and Spencer and DMG.

The notices accompanying today’s statement however contained no such announcements of legislative changes affecting EU tax claims.

The Chancellor did announce a number of measures relevant to cross border groups to be included in Finance Bill 2014 which have immediate effect. They include:

Debt Cap Provisions

The grouping rules will be amended to ensure that a UK tax-resident company which does not have ordinary share capital can be a relevant group company subject to the world wide debt cap. Further changes relate to the rules’ application to the parent company in a group with intermediaries without ordinary share capital, and to the definition of a 75% subsidiary for the purpose of tracing indirect ownership.

Controlled Foreign Companies: Profit Shifting

A new rule will be introduced relating to profit shifting by controlled foreign companies (‘CFCs’) into Chapter 9 of the Taxation (International and Other Provisions Act) 2010 (‘TIOPA’). This will prevent a CFC creditor relationship from being a qualifying loan relationship (QLR) if it arises from an arrangement which has been set up to transfer profits from intra-group lending out of the UK. This will prevent application of the provisions for full or partial exemption in ss371IB and 371ID TIOPA. A provision will also be introduced ensuring that the rules relating to QLRs operate effectively.

Double Tax Relief

The Bill will be amended to clarify that s42 TIOPA applies separately to each non-trading credit, so that any credit for foreign tax which arises will be limited to the amount of corporation tax on the non-trading credit. Legislation will also amend ss34 and 112 TIOPA, reducing the credit or deduction to be given where a foreign tax authority has made a repayment and where there are arrangements enabling another person to receive that repayment.

This article appears in the JHA December 2013 Tax Newsletter, which also features:

1. Transfer of Pensions – HMRC Guidance responding to the ROSIIP GLO by Federico M.A. Cincotta
2. The M&S Case followed again: C-322/11 K by Amita Chohan