Post by Dodd on Mar 13, 2009 9:01:11 GMT 4
UK: UK-REIT worldwide debt cap exemption
On January 26 2009, HM Revenue & Customs (HMRC) announced certain exclusions with respect to the worldwide debt cap including an exclusion for the UK-REIT regime. The worldwide debt cap operates such that UK interest deductions claimed by large groups will be capped where the UK has more debt than the external debt of the worldwide group.
In general, where a company is deemed to carry on a separate trade within the UK-REIT regime, the profits of that deemed trade are not subject to UK corporation tax. HMRC has confirmed that "intra-group finance costs that are taken into account in calculating those profits will be automatically ignored in calculating any potential disallowance under the worldwide debt cap. This is because intra-group finance costs are only considered under the worldwide debt cap if they are taken into account in calculating a company's profits subject to corporation tax."
Corporation Tax Bill
As part of the wholesale rewrite and 'simplification' of UK corporation tax law (largely contained in the Income and Corporation Taxes Act 1988 and the Taxation of Chargeable Gains Act 1992), the first Corporation Tax Bill was introduced to Parliament on December 4 2008. It is intended that the Bill does not substantively change the law in all but a few instances. It is expected to come into force in April 2009. For corporation tax purposes, it will have effect for accounting periods ending on or after April 1 2009. The Bill will also repeal the legislation which it rewrites.
Company reorganisations – chargeable gains degrouping charges
If a company leaving a group has had an asset transferred to it by a group company in the six years before, an exit/degrouping charge arises. An exemption applies if the transferee and transferor leave the group together as associated companies. In a recent case (Johnston Publishing (North) Ltd v HMRC), the Court of Appeal held that an exemption would only be available if the transferee and transferor companies were associated at the time of the intra-group transfer as well as at the time that both companies left the group together.
This case is based on a technical point of tax law, but is of relevance to any groups that have reorganised themselves in the past and may be contemplating a sale as this issue could cause an unintended CGT charge.
Jane Dodd (jane.dodd@herbertsmith.com), London
On January 26 2009, HM Revenue & Customs (HMRC) announced certain exclusions with respect to the worldwide debt cap including an exclusion for the UK-REIT regime. The worldwide debt cap operates such that UK interest deductions claimed by large groups will be capped where the UK has more debt than the external debt of the worldwide group.
In general, where a company is deemed to carry on a separate trade within the UK-REIT regime, the profits of that deemed trade are not subject to UK corporation tax. HMRC has confirmed that "intra-group finance costs that are taken into account in calculating those profits will be automatically ignored in calculating any potential disallowance under the worldwide debt cap. This is because intra-group finance costs are only considered under the worldwide debt cap if they are taken into account in calculating a company's profits subject to corporation tax."
Corporation Tax Bill
As part of the wholesale rewrite and 'simplification' of UK corporation tax law (largely contained in the Income and Corporation Taxes Act 1988 and the Taxation of Chargeable Gains Act 1992), the first Corporation Tax Bill was introduced to Parliament on December 4 2008. It is intended that the Bill does not substantively change the law in all but a few instances. It is expected to come into force in April 2009. For corporation tax purposes, it will have effect for accounting periods ending on or after April 1 2009. The Bill will also repeal the legislation which it rewrites.
Company reorganisations – chargeable gains degrouping charges
If a company leaving a group has had an asset transferred to it by a group company in the six years before, an exit/degrouping charge arises. An exemption applies if the transferee and transferor leave the group together as associated companies. In a recent case (Johnston Publishing (North) Ltd v HMRC), the Court of Appeal held that an exemption would only be available if the transferee and transferor companies were associated at the time of the intra-group transfer as well as at the time that both companies left the group together.
This case is based on a technical point of tax law, but is of relevance to any groups that have reorganised themselves in the past and may be contemplating a sale as this issue could cause an unintended CGT charge.
Jane Dodd (jane.dodd@herbertsmith.com), London