Thread by @PJChapman74

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 1, OK, I’m going to make an assumption that you’re a patient sort and so I’ll answer in full. Best place to start is the directive itself. Click on the attached.

 eur-lex.europa.eu/legal-content/…

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 2, Whizz through the preamble, but note in paragraph 1 and 2 the purpose of the ATAD, compliance with BEPS - this is important. Ignore the whole of Chapter I, start with Ch II, Article 4 – Interest Limitation rule – this is in UK legislation in TIOPA 2010 Part 10.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 3, Throughout this ignore the date of the legislation (“2010”) – I don’t know what you know about UK law but that’s just the date of the primary legislation. The “Corporate Interest Restriction” as it is in UK law was actually enacted as an amendment in November 2017.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 4, Next is Article 5, “Exit Taxation”. This is in UK law in TCGA 1992 s185-187. This is to do with ensuring companies don’t just move assets outside the UK taking a chargeable gain with them – so you pay an Exit charge.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 5, There is an inconsistency here. In Article 5 (2) it talks about a 5 year deferral period – in separate UK legislation (TMA 1970 Sch3ZB) there is a deferral period of 10 years. It’s not material, but something we may need to address as we approach transition.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 6) Article 6 is the General Anti-Abuse Rule (GAAR). A GAAR means if an authority finds a scheme is designed to avoid tax, but is not contained within a specific, or “targeted” regulation, it can nevertheless disallow the deduction under the GAAR. Introduced Fin Act 2013 s206.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 7) Articles 7 and 8 refer to CFC rules. These can be pretty complex, but we have had them in the UK for decades – the latest legislation is in TIOPA Part 9A. These are certainly BEPS compliant, but there are various exemptions in here which probably need to be checked.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 8) It’s easy to think of these as loopholes, but they do have a purpose. The idea is if a UK Company controls an offshore company, then the profits of that offshore company can be charged to the UK company. EU law itself insists that the charge must not be against genuine…

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 9) …economic activity, and should be targeted where the offshore company is being used for tax avoidance. So, for example, we have a high tax exemption. So, if your subsidiary is in, say, France it will have an entity level exemption since it is clearly not trying to avoid tax.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 10) Article 9 is Hybrid mismatches. This is really in ATAD II, so has a later implementation date.  But still, these are already UK law, TIOPA 2010 Part 6A. This is where people use a combination of cross-border residency and entity classification rules to gain a tax advantage.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 11) People who don’t think the UK takes this stuff seriously should compare ATAD Article 9 (all 58 words) and compare it to TIOPA 2010 Part 6A:

legislation.gov.uk/ukpga/2016/24/…

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 12) So why do we have this legislation before the EU states we have to? The EU is just ensuring all EU member states are compliant with the OECD BEPS Project – you remember the preamble? The UK is an OECD member and so we ensured our own compliance with BEPS.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 13) So the reason why the MSM or anyone else who values their credibility isn’t tweeting about the ATAD being a motivation for Brexit is because it simply isn’t true. Not because there aren’t greedy people about and everyone is lovely, but because there is nothing to be gained.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 14) There is still a great deal of tax avoidance that goes on, despite these rules, but the work is still ongoing. I think the global implementation of BEPS Actions 8-10, "Aligning Transfer Pricing Outcomes with Value Creation" in particular should be expedited.

@Droosaid @hannahjoinson1 @Idontmind64 @Shambles151 15) So, @Droosaid , you know what Chappers thinks (I don’t suppose you’ll be asking that question again!!) – what do you think? Do you think the ATAD was a motivation for voting/supporting Brexit?