Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
By Ben Stupples
The U.K. government is considering new guidance for its “Google tax” to clarify that multinational businesses facing the punitive measure won’t be taxed twice on the same set of profits.
Companies facing the U.K.’s diverted profits tax have a 12-month review period in which the government can change the sum of the charge. In addition, the time frame can be cut short if a business agrees to change its cross-border tax affairs, leading to the company avoiding a DPT charge and paying more U.K. tax.
The U.K.’s tax authority has written to tax advisory firms, though, to address concerns about whether there’s a chance of it charging both DPT and corporate taxes on one set of profits. This situation may arise if a company fails to agree on making any cross-border tax changes during the review period.
In an email to the firms, seen by Bloomberg Tax, Her Majesty’s Revenue and Customs stressed that it’s “comfortable” that U.K. laws make clear that only a DPT charge could apply in this scenario. However, the U.K.’s tax authority is “looking into how we can put this beyond doubt,” it added.
In an email to Bloomberg Tax, a spokesman for HMRC echoed its communication with advisory firms. “There will be no double taxation under DPT and we are looking into how we can put this beyond doubt,” he said June 22.
For HMRC, DPT charges are a growing revenue source. In the financial year that ended after March 2018, the U.K.’s tax authority collected 221 million pounds from DPT charges, a 60 percent rise from the previous 12 months.
The DPT “is an important measure for HMRC and is designed to encourage behavioural change in businesses,” HMRC said in its latest annual report. “Last year diverted profits project teams developed new innovative ways of identifying, risk assessing and investigating profit.”
The U.K. introduced the DPT in 2015 amid concern that Google parent Alphabet Inc. and other global tech companies were avoiding local corporate taxes by stashing profits offshore. Applying equally to U.K. multinationals, the measure sets a 25 percent levy on profits the British government deems to have improperly avoided U.K. taxes. The country’s current corporate rate is 19 percent.
At the time, the DPT sparked controversy, as the U.K. took individual action amid the Organization for Economic Cooperation and Development’s global project to rewrite tax policy for big companies. Last year, though, Australia enforced a measure similar to the U.K.’s DPT, with higher penalties.
Most recently, the Cooper Companies Inc., a member of the U.S. benchmark Standard & Poor’s 500 stock index, said this month it paid a 31 million-pound ($41 million) DPT charge to HMRC. Any multinational that receives a DPT assessment must pay the disputed amount of tax in question before it can begin the process to recover the sum, starting with the 12-month review period.
In line with the U.K.’s DPT laws, Cooper Companies thus said in a June 8 quarterly filing that it paid the charge on Jan. 19. “The company continues to cooperate with the U.K. Tax Authorities to resolve this issue,” said the Pleasanton, Calif.-based maker of contact lenses and surgical tools.
To contact the reporter on this story: Ben Stupples in London at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2018 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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)