The Law Society has warned that HMRC plans for a new Diverted Profits Tax (DPT), the so-called Google tax, could go beyond its intended targets and affect the UK's global competitiveness
In its response to HMRC's consultation on the DPT draft legislation, the Law Society highlighted that the unintended impacts of the legislation, as currently drafted, include the UK losing investment to other jurisdictions because of uncertainties, and unnecessary administrative burdens and red tape.
It adds that UK-headquartered international businesses that maintain staff and functions in non-UK jurisdictions for commercial reasons could be perceived to be diverting profits from the UK to avoid tax, whenever there is non-UK activity.
Law Society tax law committee chair Gary Richards says the legislation ‘needs to be narrowly framed so that it only affects its intended targets, avoiding a negative impact on the UK's competitiveness and risking successful challenge under the UK's treaty obligations’.
The Society recommends considering delaying or at least staging the introduction of the DPT so that the OECD's Base Erosion and Profit Sharing (BEPS) project, which is due to report by the end of 2015 can be taken into account. CIOT also made a similar recommendation in its response to the consultation.
The Law Society’s submission is available at http://www.lawsociety.org.uk/Policy-campaigns/Consultation-responses/Diverted-profits-tax/