Autumn Budget 2021: International Tax and subtle but important changes for the post-Brexit economy.

In a Budget that was always going to be focussed on post-Covid economic recovery and longer-term fiscal concerns, international tax was not expected to feature more than as a policy footnote.  Developments in company re-domiciliation, diverted profits tax and group relief were announced and are all significant.

The UK Government has launched a consultation on plans to allow corporate re-domiciliation.  This would allow companies to move their jurisdiction of incorporation to the UK without the need to create a new legal entity, providing continuity of structures, contracts and operations. Aligning to other common law countries and over fifty global jurisdictions, the aim is to keep the UK as a primary global business and investment centre. While consideration will need to be given to economic substance, particularly when headquarters re-domicile, the intention of this consultation would appear to be to increase the perception and reality of a post-Brexit Britain open for business.

In addition to this, legislation will be introduced to allow a Mutual Agreement Procedure outcome to be implemented in relation to Diverted Profits Tax (DPT). This aims to ensure that double tax treaties are implemented as intended. While indicating that DPT is here to stay, this legislative change may provide certainty to taxpayers.

The Finance Act will also repeal legislation that permits UK companies, in defined circumstances, to claim group relief for losses incurred in the European Economic Area (EEA). It will also amend rules that limit the losses that EEA resident companies trading through a UK permanent establishment can surrender as group relief.

While all important changes, taken as a whole, the theme for international tax in this year’s budget appears tonal as much as legislative: the UK is a business-friendly jurisdiction to operate in with consistent and clear rules.