UK publishes draft clauses for Finance Bill 2016 on hybrid mismatches, patent box, corporate transparency

The UK government on December 9 issued draft legislation for Finance Bill 2016, including measures addressing hybrid mismatch arrangements and the UK patent box, and introducing new transparency requirements for large corporations and partnerships. The government also published responses to a number of consultations.

The draft hybrid mismatch legislation, proposed to take effect January 1, 2017, is consistent with the final recommendations of the OECD base erosion profit shifting (BEPS) report under action 2, the government said. The rules are designed to counter tax avoidance through arrangements which result in double deductions for payments or a deduction for a payment with no corresponding inclusion in ordinary income.

A series of examples illustrating the application of the hybrid mismatch rules will be published on December 22, the the government said.

The draft patent box legislation makes changes to UK laws that provide for a reduced rate of corporation tax on profits from patents and similar intellectual property. The legislation would conform the UK patent box to comply with the new international framework for preferential tax regimes for intellectual property agreed to by the G20 in the final BEPS reports.

The UK published a consultation on the UK patent box, which ran from October 22 to December 4.

Also among proposals is a draft law that would require large corporations and partnerships to publish their tax strategy in relationship to UK taxation on the internet. The measure was announced at Summer Budget 2015 and a public consultation was held from July 22 to October 14.

See:

• Draft clauses and explanatory notes for Finance Bill 2016

• Overview of legislation in draft

• Tackling aggressive tax planning : implementing the agreed G20-OECD approach for addressing hybrid mismatch arrangements – summary of responses

• Corporation tax: patent box – compliance with new international rules

• Draft clause 31 (patent box)

• Draft explanatory notes clause 31 (patent box)

• Corporation tax: anti-hybrid rules

• Draft clause 33 (hybrids)

• Draft explanatory notes clause 33 (hybrids)

• Improving large business tax compliance – summary of responses

• Tax administration: large businesses transparency strategy

• Draft clause 65 (corporate strategy)

• Draft explanatory notes clause 65 (corporate strategy) 

Related MNE Tax articles:

• UK proposes to amend patent box to comply with BEPS standards

• UK to implement OECD hybrid mismatch proposal with special rules for banks and insurers

• UK proposes MNE “diverted profits” tax, releases consultation on hybrid mismatches