Proposed amendments to the recently enacted rules on the taxation of offshore receipts in respect of intangible property have now been released in draft format along with draft guidance, for consultation.
Certain of the proposed changes (such as a new “specified territory” exemption and a new look-through rule for resellers) are the result of consultation earlier this year. These amendments, once made, would be effective retroactively to the date of commencement of the rules. Other amendments would broaden the scope of the rules—for example by raising the threshold to achieve exemption through residence in a full treaty territory, and will only apply to amounts arising after the amendments are made.
The offshore receipts in respect of intangible property rules impose income tax at 20% on gross amounts arising from 6 April 2019 to certain non-residents from the enjoyment or exercise of intangible property rights when this directly or indirectly enables, facilitates or promotes UK sales. The rules apply to groups that generate UK-derived intangible returns through entities resident in jurisdictions without a full UK tax treaty.
At the time the rules were enacted, a provision was included to allow regulations to be made subsequently to address deficiencies or unintended consequences. These regulations have now been published in draft for comment and will be formalised in Autumn 2019.
Draft guidance has also been published by HM Revenue & Customs for comment.
The changes fall into two categories.
No material changes are proposed to the existing exemptions for high taxed companies, “home grown” substance and groups that make UK sales below £10 million.
A consultation period will run until 19 July 2019.
Read a May 2019 report prepared by the KPMG member firm in the UK
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