The Treasury’s multinational business forum has the UK’s controlled foreign companies (CFC) rules back onto its agenda. The CFC rules are intended to stop UK companies routing passive income to subsidiaries in low tax jurisdictions overseas – passive income can include royalties from licences of intellectual property (amongst other forms of income). The CFC rules were originally intended to be updated as part of the legislation bringing in an exemption from corporation tax for foreign dividends, but the proposed changes were so broad as to be unworkable and would have meant that UK companies would be penalised for owning any subisidiaries with IP; the Treasury then postponed the CFC rules update to have more time to consult with business.
At the February meeting of the Business-Government forum on tax and globalisation an overview of the Government’s plan for taking forward the work on CFC reform was presented. The presentation slides and an overview of initial milestones for the CFC reform can be accessed on the forum page on the Treasury website.
The slides and milestones indicate an emphasis on eliminating artificial diversion of profits from the UK, which is welcome – hopefully the Treasury’s view of artificial will be not too divergent from commercial reality. The milestones suggest that considerations of the impact on IP will come after finance/treasury issues have been looked at, with more substantial discussion unlikely until the autumn.
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Tags: CFC, consultation, Treasury