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Technical | Update
Consultations
IR35
The IR35 consultation has
finally arrived. Off-payroll
working in the public sector:
reform of the intermediaries
legislation sets out how the
government intends to work
with the self-employed. It
is quite possible that this
method of working could
easily apply in the future to
all in both the private and
public sectors, though the
consultation goes out of its
way to state that this is for
public sector ‘off-payroll
engagements of workers’.
The consultation is open
until 18 August. There
will then be a period of
post-consultation analysis,
and a further, technical
consultation will take place,
with legislation expected
to apply from April 2017.
This is clearly an ambitious
timeframe that would leave
many organisations and their
software providers little time
to change their systems.
The key change is that the
‘liability to pay the relevant
employment taxes will
move to the engager or the
agency supplying the worker.
This means public sector
organisations and agencies
supplying workers to the public
sector will be responsible for:
deciding if the rules apply;
*
and
calculating, reporting and
*
paying the relevant taxes if
they do.’
HMRC can then decide
whether it feels that the rules
have not been followed, and
who is liable for any taxes and
penalties. You can find this
consultation at bit.ly/ir35-pub.
legislation in Finance Bill
2017’. The consultation
asks if the current rules are
out of date, if they require
modernisation and if they
are making the UK less
competitive as a holding entity
destination. You can find the
consultation at bit.ly/sse-cons.
Tax deductibility
Tax deductibility of corporate
interest expense is open for
comment until 4 August. This
is a detailed consultation
on the new rules on interest
deductibility that will apply
from April 2017 and are in line
with the recommendations set
out by the Organisation for
Economic Co-operation and
Development. For groups, the
UK will be introducing a fixed
ratio rule. This limits a group’s
UK tax deductions for net
interest expense to 30% of its
UK EBITDA, with any excess
carried forward but expiring
after three years. It’s proposed
that the following conditions
also apply:
*
There is a de minimis
allowance of £2m per
annum, which means that
groups with net interest
expense below this are
unaffected by the rules.
Rules limit interest relief to
*
the net adjusted groupinterest
expense (this is the
modified debt cap rule).’
More at bit.ly/1tax-corp.
Transfer pricing
Introduction of secondary
adjustments into the UK’s
domestic transfer pricing
legislation is open for
comment until 18 August and
affects large international
entities. It highlights the
secondary adjustments
from the OECD transfer
pricing guidelines – either
constructive dividends or
equity contributions. In simple
terms the transfer pricing
adjustment is treated as being
a distribution or an equity
contribution. The government’s
preference is to introduce a
different secondary adjustment
that ‘treats the excess profits
as a deemed loan from the
potentially advantaged
company. Such a deemed
loan would have interest
imputed upon it, which would
then be treated as taxable
income.’ More at bit.ly/
sec-adj.
Corporation tax
Reforms to corporation tax
loss relief: consultation on
delivery is open for comment
until 18 August. It proposes a
significant reform of loss relief
by limiting the relief available.
The conditions are that ‘losses
arising from 1 April 2017 can
be carried forward and set
against the taxable profits
of different activities within
a company and the taxable
profits of its group members’
but ‘the amount of annual
profit that can be relieved by
carried-forward losses will be
limited to 50% from 1 April
2017, subject to an allowance
of £5m per group’.
More at bit.ly/cons-rel.
Shareholdings exemption
Reform of the Substantial
Shareholdings Exemption
is open until 18 August. It
highlights that the replies
‘will allow the government
to consider the merits of
reform ahead of [the] Autumn
Statement and possible
Something to talk about
Agent Talking Points are weekly online digital meetings aimed at tax agents, usually lasting
45 minutes to an hour. The sessions provide agents with the opportunity to ask questions of
subject matter experts from HMRC, across a range of different topics. A list of current and
past webinars can be found at bit.ly/hmrc-talk.
Accounting and Business 07/2016