International briefing for January 2015

Since my last article in November we have seen an Autumn Statement and draft clauses for Finance Bill 2015 published in the UK. By far the most significant announcement in the international tax area was the new 25% diverted profits tax. This has two broadly defined aims:

• to prevent an overseas entity with substantial UK activities from deliberately avoiding the establishment of a UK taxable presence; and
• to prevent UK companies or permanent establishments from reducing their corporation tax by making payments to related parties with an effective lower tax rate.

However a major and a contentious effect of the law is to create a presumption against the taxpayer in transfer pricing cases where one of the parties is considered to fail the economic substance...