Anti-avoidance measures

Several measures were announced aimed at tackling tax avoidance.

Incorporation

Individuals are to be prevented from claiming Entrepreneurs’ Relief on disposals of the reputation and customer relationships associated with a business (‘goodwill’) when they transfer the business to a related close company. In addition, the corporation tax relief that a company may obtain for the acquisition of goodwill is to be restricted when the business is acquired from a related individual or partnership. These changes will affect transfers on or after 3 December 2014.

Loss relief

Legislation is to be introduced, with effect from 3 December 2014, to deny loss relief where a miscellaneous loss, or miscellaneous income, arises from relevant tax avoidance arrangements. Legislation is also to be introduced, with effect from tax year 2015/16, to limit relief to miscellaneous income of the same type as the loss.

Multinational enterprises

A new tax to counter the use of tax planning techniques by multinational enterprises to divert profits from the UK will be introduced. The Diverted Profits Tax will be applied using a rate of 25% from 1 April 2015.

Legislation is to be introduced that gives the UK the power to implement the Organisation for Economic Co-operation and Development (OECD) model for country?by?country reporting. This will require multinational enterprises to provide high level information to HMRC on their global allocation of profits and taxes paid, as well as indicators of economic activity in a country.

The Government is to consult on the UK’s plans for implementing agreed OECD rules for addressing hybrid mismatch arrangements. These rules will aim to prevent multinational enterprises avoiding tax through the use of certain cross?border business structures or finance transactions.

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