Last week HM Revenue & Customs (HMRC) launched technical consultations on two aspects of the draft legislation on the Finance Bill 2014, namely the modernisation of the taxation of corporate debt and derivative contracts and the artificial use of dual contracts by non-domiciles.
As far as modernising the taxation of corporate debt and derivative contracts, is concerned, the amendments will consolidate the loan relationship rules in Part 5 of the Corporation Tax Act 2009 that apply to partnerships with company members and the changes will consolidate establish a general principle that all the rules that apply in relation to companies that are party to loan relationships also apply to corporate partners in firms that are party to loan relationships.
According to HMRC, the measure will be monitored through information received from company tax returns and tax administrative data and through regular communication with businesses affected by the measure. The consultation closes on February 14.
Meanwhile, concerning the artificial use of dual contracts by non-domiciles, HMRC says that this will affect UK resident non-domiciles paying tax on the remittance basis who use separate employment contracts for overseas duties with the same or associated employers.
The measure will tax non-domiciles on the overseas employment income it identifies according to the ‘arising’ basis, which means the income caught by this measure will cease to be eligible for remittance basis tax treatment.
Legislation will be introduced to take certain ‘overseas’ employment income out of the definition of ‘chargeable overseas earnings and will take certain employment related securities income out of the definition of ‘foreign securities income. The legislation will also take certain overseas employment income that is provided through a third party out of the calculation of third party employment income to which the remittance basis applies.