UK and International Tax news

U Turn On Tax Treaties And Anti Avoidance

Monday 12th September 2011

Further to our International Tax News item of 8 August 2011, on 9 September 2011, the Exchequer Secretary to the Treasury issued a statement confirming that following adverse concerns raised in the responses to the consultation, the Government had decided not proceed further with the consultation on the proposed legislation  nor include it in the 2012 Finance Bill.

The statement went on to confirm that whilst the Government was committed to providing certainty to taxpayers, it acknowledged the concerns raised could cause significant uncertainty for compliant UK businesses and overseas investors about its intended scope and its practical effect.

The Government has announced that it will continue to challenge specific arrangements that seek to abuse provisions in a double tax agreement, and if it concludes in the future that alternative approaches for legislating against treaty abuse are considered necessary, it will consult on these alternatives in line with the Tax Consultation Framework [TCF].

In the absence of any prior consultation in accordance with the TCF (the first two stages were skipped), ill thought out draft legislation which was to have hit the statute books next year has now fortunately been dropped.  The two proposed broad treaty override provisions were very likely to have caught many bona fide situations and conflicted with international law.

Contact Us