General UK Tax Developments: October 2018

General UK Tax Developments

CIOT responds to the draft profit fragmentation provisions in the Finance Bill 2019

The Chartered Institute of Taxation (CIOT) has published its response to the profit fragmentation rules published on 6 July 2018 in Clause 10 and Schedule 6 of the draft Finance Bill 2019.

The CIOT considers that the rules as currently drafted would contravene EU law, in particular the freedom of establishment, as they would potentially create a different tax treatment where there were multiple jurisdictions involved in a transaction compared to a purely domestic situation. Whilst conceding that restriction of fundamental freedoms is possible where there is justification, the CIOT notes that the conditions for the new rules to apply are significantly wider than what EU case law indicates is justifiable.