UK Government Publishes Notice on Cross-Border Tax Avoidance

The UK government has published a notice on cross-border tax avoidance. The notice, which was published on July 1, 2023, sets out the government's approach to cross-border tax avoidance and provides guidance on how businesses can comply with the law.

The notice covers a wide range of topics, including:

• The definition of cross-border tax avoidance

• The different types of cross-border tax avoidance schemes

• The government's approach to tackling cross-border tax avoidance

• The steps that businesses can take to comply with the law

The notice is a significant step in the government's efforts to tackle cross-border tax avoidance. It provides businesses with clear guidance on how to comply with the law and helps to ensure that the UK tax system is fair for everyone.

What is cross-border tax avoidance?

Cross-border tax avoidance is the use of artificial arrangements to reduce a taxpayer's tax liability. These arrangements often involve moving profits or assets to low-tax jurisdictions.

What are the different types of cross-border tax avoidance schemes?

There are many different types of cross-border tax avoidance schemes. Some of the most common schemes include:

• Transfer pricing arrangements: These arrangements involve setting the price of goods or services between related companies in different countries at an artificially low level. This can reduce the taxable profits of the company in the high-tax jurisdiction.

• Double Irish arrangements: These arrangements involve moving profits through two Irish subsidiaries to a low-tax jurisdiction. This can reduce the taxable profits of the company in the UK.

• Hybrid mismatch arrangements: These arrangements involve combining two or more different types of entities or instruments in a way that creates a tax advantage.

What is the government's approach to tackling cross-border tax avoidance?

The government's approach to tackling cross-border tax avoidance is based on three pillars:

• Prevention: The government works to prevent cross-border tax avoidance by closing loopholes in the tax system and by making it more difficult for businesses to use artificial arrangements to reduce their tax liability.

• Detection: The government has a number of tools to detect cross-border tax avoidance, including information sharing with other countries and targeted audits.

• Enforcement: The government takes action against businesses that engage in cross-border tax avoidance, including issuing penalties and criminal prosecutions.

What steps can businesses take to comply with the law?

Businesses can take a number of steps to comply with the law on cross-border tax avoidance, including:

• Understanding the tax implications of their cross-border activities

• Getting professional advice on tax planning

• Keeping good records

• Cooperating with tax authorities

The notice on cross-border tax avoidance is a valuable resource for businesses that want to comply with the law. It provides clear guidance on the different types of cross-border tax avoidance schemes and the steps that businesses can take to avoid them.

https://www.gov.uk/government/publications/notices-made-under-s32a-of-the-taxation-cross-border-trade-act-2018/notice-made-by-hm-treasury-under-section-32a-of-the-taxation-cross-border-trade-act-2018