TaxCorporate TaxPBR follow up: More work awaits tax advisers

PBR follow up: More work awaits tax advisers

Corporate tax advisers will receive an abundance of new work after Gordon Brown's decision to extend transfer pricing legislation, which is likely to force a wave of company restructuring.

Pre-Budget special report

Experts believe the chancellor’s changes will result in a ‘job creation scheme for accountants’, as businesses rush to seek advice on switching from subsidiaries to new divisions.

‘There will possibly be a pressure to divisionalise rather than own businesses through separate legal entities,’ said Philip Ridgway, tax partner at Deloitte. The changes mean that transactions between a UK subsidiary and its parent will be treated as if it were a transaction between unrelated companies. Interest charges and tax liabilities are introduced as a result.

The legislation, which will bring the UK tax system further in line with Europe, is a response to the increasingly bitter battles between the Inland Revenue and the European Court of Justice. Brown said that the changes would come into force next April.

According to Ridgway, the rules will place a huge administrative burden on UK companies, while allowing them to adjust their affairs to produce the same cash position prior to the changes.

To make matters worse, the changes could still be classed as discriminatory under European law, according to Christopher Morgan, head of the EU tax group at KPMG, because they provide an advantage to transactions between UK companies.

Adam Craig, head of the EU tax group at Deloitte, agreed and said the fact SMEs had escaped the legislation under Brown’s proposals could have the same effect. ‘The change will assist groups wishing to restructure, which may be highly desirable for commercial reasons and may help reduce the administrative impact of the transfer pricing legislation,’ reads the new Revenue paper on corporation tax reform.

Related Articles

Watch out when winding up

Corporate Tax Watch out when winding up

1w Emma Rawson, ATT Technical Officer
How might Brexit affect UK tax policy?

Brexit & Economy How might Brexit affect UK tax policy?

2w Santhie Goundar
Corporation tax losses – your newly flexible friends

Corporate Tax Corporation tax losses – your newly flexible friends

2m Emma Rawson, ATT Technical Officer
HMRC large business tax enquiry duration rises to 3 years

Corporate Tax HMRC large business tax enquiry duration rises to 3 years

3m Emma Smith, Managing Editor
SMEs paying higher rate of corporation tax than big businesses

Corporate Tax SMEs paying higher rate of corporation tax than big businesses

3m Alia Shoaib, Reporter
Big names, little tax: Airbnb, Facebook, Kellogg’s, eBay

Corporate Tax Big names, little tax: Airbnb, Facebook, Kellogg’s, eBay

6m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

6m Emma Rawson, ATT Technical Officer
EU divided over radical tax reforms targeting tech giants

Corporate Tax EU divided over radical tax reforms targeting tech giants

7m Alia Shoaib, Reporter