TaxCorporate TaxBattlelines drawn in CFC conflict

Battlelines drawn in CFC conflict

As the crucial consultation on the taxation of foreign profits closed at the end of last week, battle lines were already being drawn as between the revenue authorities and tax advisers

The
consultation
document
proposes a series of wide-ranging reforms to corporate taxation,
including the exemption of foreign dividends from tax, new controlled foreign
company rules and restrictions to interest relief in the UK.

The foreign dividend rules have been welcomed, and although there are
concerns about reducing interest relief according to a multinational’s debt
global levels, Treasury proposals have been broadly well received.

But in the area of CFCs stark divisions are emerging.

Current proposals will require groups to separate all foreign income as
either ‘passive’ or ‘active’, raising fears of increasing red tape and
bureaucracy.

‘It is unrealistic to expect international companies to go through every
minute detail of foreign income in order to decide whether it is active or
passive,’ says Grant Thornton international tax partner Heather Self.

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