Clifford Chance has provided an excellent primer discerning the objectives, framework and challenges of the UK DPT that await MNE’s with a commencement date of 1 April, 2015. The most recent guidelines were set forth in the latest UK Finance Bill, including a narrowing of the notification requirement while expanding the permanent establishment (PE) threshold. A link to the summary and related PDF detail, as well as recently issued guidance from HMRC, are included for reference:
This new “tax” is controversial, although its tentacles have already spread to Australia and other countries for similar consideration and implementation. Additionally, it is worth noting that the OECD is closely watching these actions, remembering the viral discussions that ensued after UK and Germany jointly endorsed the “substantial nexus” approach for intangibles.
MNE’s will need to understand this new initiative and design a course of action, starting with documentation of its actions directly / indirectly in the UK and deciding if it is beneficial, and how, to discuss such conclusions with HMRC. Apart from potential double taxation, there are many uncertainties introduced by this legislation.
Only time will tell how aggressively HMRC will pursue this “tax,” especially with its commencement on the heels of an upcoming election for which politics and taxes are always intertwined.