HMRC: Tax Treaties Anti-avoidance

The Government announced at the Budget on 23 March 2011 that it intended to introduce legislation in Finance Bill 2012 to counter avoidance schemes that exploited the provisions of double taxation agreements (DTAs). The draft legislation included in this note forms the basis of consultation on this proposal.

The consultation is being conducted in line with the Tax Consultation Framework. There are five stages to tax policy development and implementation:

• Stage 1 - Setting out objectives and identifying options;

• Stage 2 - Determining the best option and developing a framework for implementation including detailed policy design;

• Stage 3 - Drafting legislation to effect the proposed change;

• Stage 4 - Implementing and monitoring the change; and

• Stage 5 - Reviewing and evaluating the change.

This consultation is taking place during Stage 3 of the process. The draft legislation included in this note is being published now to provide as much time as possible to consult and ensure that the legislation will operate as intended.

HMRC welcomes views on the approach that the draft legislation takes to tackling tax avoidance using DTAs, as outlined in Chapter 2. We would also be grateful to hear views on whether the formulation of the tests achieves its objective, and whether there are any perceived unintended consequences, including arrangements caught by the draft legislation that are considered to be ones to which it should not apply and the persons that might be unintentionally affected. A tax information and impact note on this measure will be published in the autumn taking into account comments received.

Comments on this note should be made by 22 September 2011 to Tom Matthews (telephone: +44 (0)20 7147 2661, email tom.o.matthews@hmrc.gsi.gov.uk). This feedback will be used to inform the final version of the draft legislation that will be published in the Autumn when interested parties will have a further opportunity to comment.