Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
By Ben Stupples
Imperial Brands Plc, the maker of JPS cigarettes, has become the first company to warn publicly over the European Union’s state aid investigation into a U.K. government tax scheme.
The Bristol, England-based company is “monitoring” the investigation, according to its Nov. 7 full-year results. Imperial doesn’t “currently consider” that an accounting provision is needed, it added.
Three weeks ago, the European Commission said it had opened an “in-depth” state aid probe over whether the U.K. gave multinational companies an unfair advantage over their local competitors through exempting the larger businesses from specific measures to target tax avoidance.
Like Ireland’s battle over whether Apple Inc. owes it 13 billion euros ($15.1 billion) in unpaid tax, the EU may force the U.K. to recover the relief companies have gained with the exemption.
In a Nov. 8 email, an Imperial Brands spokesman told Bloomberg Tax it is “too early” to comment on the possible effects of the probe as the commission hasn’t released its preliminary findings.
Laws “targeting tax avoidance cannot go against their purpose and treat some companies better than others,” the EU’s competition commissioner, Margrethe Vestager, said in an Oct. 26 statement. “This is why we will carefully look at an exemption to the U.K.'s anti–tax avoidance rules for certain transactions by multinationals, to make sure it does not breach EU State aid rules.”
Dating to the 1980s, the U.K.’s controlled foreign company rules aim to stop businesses from using overseas subsidiaries to cut their tax bills by shifting profits to low-tax jurisdictions.
When the U.K. last changed its CFC rules in 2013, however, it included a U.K. tax exemption for certain intra-group financing between two subsidiaries based outside the country.
“Thus, a multinational active in the U.K. can provide financing to a foreign group company via an offshore subsidiary,” the European Commission said in its statement last month. The exemption allows the parent company to avoid U.K. tax if the subsidiary receiving interest payments via the financing is in a tax haven, or if the financing income is not reallocated to the U.K., it added.
Under former Chancellor George Osborne, the U.K. officially announced its intentions to change CFC rules seven years ago in the government’s Corporate Tax Roadmap.
The changes included “a finance company partial exemption that in broad terms will result in an effective U.K. tax rate of one quarter of the main rate on profits derived from overseas group financing arrangements,” the 2012 budget said.
To contact the reporter on this story: Ben Stupples in London at email@example.com
To contact the editor responsible for this story: Penny Sukhraj at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)