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The legislation is extremely complex. It is set out in Schedule 10 of the Finance Bill and stretches to nearly 80 pages, expanding even the original draft of nearly 50 pages published in December.


The legislation is designed to counteract tax planning intended give rise to


(a) a deduction/non-inclusion mismatch, or

(b) a double deduction mismatch.


A deduction/non-inclusion mismatch arises where an amount is deductible from a person's income


(a) without a corresponding amount of ordinary income arising to another person, or

(b) where an amount of ordinary income does arise to a person but is under taxed.


A double deduction mismatch arises where


(a) an amount is deductible from more than one person's income, or

(b) an amount is deductible from a person's income for the purposes of more than one tax.


The cases concerned involve:


(a) payments or quasi-payments under or in connection with financial instruments or repos, stock lending arrangements or other transfers of financial instruments,

(b) hybrid entities,

(c) companies with permanent establishments, or

(d) dual resident companies.


In view of the complexity of the rules, we are not going to comment further here. As we commented at the time of the publication of the draft Finance Bill in December, if you have any of these, you are presumably aware of the fact. You need to review your arrangements.  





The rules come into effect from 1st January 2017.


Interest deductibility


The BEPS proposals on interest deductibility propose a limit for tax deductibility for interest payments as a proportion of EBITDA, individual countries to select a limit of 10% to 30%. The UK proposes to adopt the upper limit of 30% for Corporation Tax purposes with effect from 1st April 2017. There will be a de minimis limit of £2 million of interest on a group basis. We were expecting the the proposed legislation to be in the Finance Bill, but cannot find it anywhere. We will update this when we find it, or when it is published if it is really not in there.


Transfer pricing


There is a brief clause amending the definition of "transfer pricing guidelines" to adopt BEPS Final Report published on 5th October 2015.


Stamp Duty Land Tax


This has been covered extensively by other commentators. The key changes are:


i). SDLT on commercial property is changing to a progressive system, with a new top rate of 5% on transactions over £250,000:






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