Avoidance Involving Profit Fragmentation: A Consultation

In a new bid to tackle tax avoidance schemes, the government has launched a consultation targeting arrangements that place profits that would otherwise be attributable to a UK trader or professional outside the scope of UK taxation. The new legislation, intended to take effect from April 2019, would bring these profits within the charge to UK tax, include broad notification obligations and require faster payment of any tax in dispute.

What is the government seeking to address?

The consultation is targeted at arrangements where a UK resident individual carries on a business in the UK (either as a sole trader, in partnership or as an employee or director of a company) and moves profits to an offshore entity located in a low or tax-free jurisdiction. The offshore entity may be held by an offshore trust and the arrangements must enable either the individual or someone connected to him to benefit from the profits moved offshore.