The changes will introduce a more robust procedure to resolve double tax disputes by strengthening affected taxpayers’ rights in the UK
On 1 July, HMRC announced a consultation on draft regulations to implement EU Directive 2017/1852 relating to improving dispute resolution mechanisms between Member States. The rules would give affected taxpayers the right to bring complaints about the way in which double tax disputes are being handled and offer a range of options to seek their resolution. These measures add to the raft of improvements to treaty dispute resolution that have been made in light of BEPS Action 14 and potentially offer new options for taxpayers to achieve resolution. However, given the continuing uncertainty around Brexit, it remains to be seen how these proposals will ultimately apply to UK businesses.
Whilst the mutual agreement procedure often works well to resolve double tax disputes, its operation has largely been a matter for the Competent Authorities within HMRC with limited routes available to taxpayers to raise concerns about the process. The draft regulations establish a formal complaints process where issues can be referred to HMRC Commissioners to consider.
They go on to set out a number of resolution options – ranging from a unilateral decision by HMRC, through resolution reached by a mutual agreement with the other jurisdiction, to a decision reached by an independent Advisory Commission or Alternative Dispute Resolution Commission.
Potentially this represents a significant improvement to the rights of taxpayers to get appropriate resolution of double tax disputes by using these mechanisms. The directive is required to be brought into law by all Member States and so should impact the prospects for successful dispute resolution across the EU.
However, there is inevitably a significant degree of uncertainty around the introduction and continuing application of these rules whilst the Brexit issue remains unresolved.
The consultation closes on 27 August 2019.
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