ANTI-AVOIDANCE TAX LAWS & THE MODERN WORLD
Book Your Free ConsultationOver the last couple of decades there has been a significant tightening of anti-avoidance provisions both in the UK and generally amongst developed countries throughout the World.
In the case of the UK, many of the traditional benefits enjoyed by non-domiciled but ordinarily resident individuals no longer exit. However, prudent tax planning by those who have recently made or intend to make the UK their home can still provide significant benefits
SUBSTANCE OVER FORM TESTS
Since the 17 July 2013 the UK has had ‘substance over form’ legislation similar to that introduced many years before in countries such as Canada. In the UK, it is called the General Anti-Abuse Rule (GAAR) and enables HMRC to review structures to ensure that they have substance and have not been created merely to avoid taxation. GAAR is not a replacement for previous anti-avoidance legislation, such as the controlled foreign company (CFC) legislation, but complimentary and seeks to ensure that technicalities cannot be used to avoid legitimate tax liabilities.
The consequence of the above certainly does not mean that companies and individuals cannot plan and/or seek to mitigate their tax exposure but rather that structures must be part of an overall personal or business strategy that independently makes sense notwithstanding any financial benefits.
TRADITIONAL OFFSHORE COMPANIES HAVE LITTLE USE SAVE AS INTERMEDIARY AND/OR HOLDING ENTITIES
Offshore or ‘International Business Corporations’ (IBC’s) established in traditional havens such as the British Virgin Islands, Belize or even the Channel Islands have far less practicable use than ever before. The reason, especially for trading companies, is that these jurisdictions either have no or limited tax treaty networks and are often fully exposed to the full rigors of applicable anti-avoidance rules not to mention withholding taxes.
Fortunately, The SCF Group has access to a wide range of professionally qualified staff encompassing certified and chartered accountants, specialist international tax lawyers based both in and outside of the United Kingdom. In fact, it is our belief that we are uniquely positioned to provide a full range of domestic and international accountancy, legal and tax planning services at a reasonable cost. We also believe that being smaller gives us a more personalised relationship with clients and probably explains why we still have so many of our original clients still with us after more than 30 years in business.
BREXIT HAS INCREASED THE NEED FOR UK BUSINESSES TO PLAN AHEAD
The decision by the United Kingdom to leave the EU was without doubt one of the most momentous decisions ever taken and still impacts every UK based business. Undoubtedly, the UK has far less favourable trading conditions than previously, making tax planning more important than ever. The ‘issues’ that have occurred include but are not limited to:
- Limited or less favourable tax treaties outcomes. Although the UK left the EU a number of years ago, it still has not managed to replace many of its key treaties previously enjoyed as an EU member.
- The UK has become isolated as a middle power with the inability to compete with the economic superpowers of the EU, China and US.
- World Trade Organization (WTO) terms are not favourable to countries very dependent (as is the case with the UK) on the service and/or banking sectors.
- The ‘historic’ ties to former Dominion countries such as Australia, Canada and New Zealand have been weakened for many decades.
- Brain Drain – London, despite its position as the dominant European financial centre, has nonetheless contracted with Dublin, Frankfurt, Luxembourg and Paris all benefiting.
In precis, not only has the anti-avoidance and regulatory environment become more difficult to navigate but the world seems to be dividing into economic power blocs with the UK no longer having the economic might to protect itself. This unpleasant reality means that UK firms and individuals or indeed those intending to move to or invest in the UK need expert advice to ensure as much economic protection as possible. This is where we believe the SCF Group and its worldwide partners are uniquely positioned to assist.