Revenue enforces gear up for international tax swoop
Companies with US listings have been warned that they could face a swoop from international tax authorities for detailed documentation outlining uncertain and risky tax positions
The documentation, which is compiled to adhere to a new US accounting
standard known as FIN 48, is believed to have attracted the interest of the US’s
Internal Revenue Service and other revenue bodies.
Advisers have warned that HM Revenue & Customs could also start asking
for paperwork.
‘Tax authorities obviously know that FIN 48 exists. They are aware that
companies now have detailed documentation about what’s in their tax reserve and
where their uncertain tax positions are.
‘Obviously any tax inspector would be very interested to get hold of those
papers,’ said Jeremy Curd, a senior tax manager at PricewaterhouseCoopers.
In some regions revenue authorities have already demanded and received access
to FIN 48 documentation, increasing fears among companies that HMRC and the IRS
will soon do the same, or that regions will share details they have accessed.
‘If you look around the world we know of examples of companies that have been
asked for tax reserve papers and have given them over. We have to be concerned
about how tax authorities share that information and whether it can get back
into the UK,’ Curd said.
FIN 48, which became mandatory in December 2006, requires companies that file
US GAAP accounts to disclose any uncertain tax positions in their financial
statements.
Companies such as Cadbury Schweppes, Vodafone and GlaxoSmithKline, are now
required to make detailed disclosures of their tax positions under FIN 48.
The standard has been praised by tax activists, who believe that following
the $3.4bn (£1.8bn) settlement GSK made with the IRS and Vodafone’s £2bn dispute
with HMRC, it is essential for shareholders to have a clear picture of tax
plans.
Although FIN 48 currently only applies to UK companies listed in the US, the
IASB is currently considering drafting a similar standard. An HMRC spokesman
said the taxman was interested in learning about sources of information used by
tax authorities around the world to help identify potential cases of evasion or
avoidance.