The UK government plans to close a loophole it claims has been exploited by developers to avoid tax.
The announcement came as part of measures announced in the Budget to bring about an end to offshoring profits by large corporations.
The government claims that “some developers of UK land seek to exploit the current rules” by registering offshore for tax purposes while continuing to take profit from the sale of UK land and property.
At present the government has to prove that an offshore company has some form of business in the country before it can claim tax on the profit of the sale of UK land.
The government states that such an arrangement is unfair on UK-registered companies, and reduces tax receipts from a “natural resource”.
The new proposals eliminate the need for the government to identify a business of any type based in the UK as long as the profit is realised on the trade of UK land.
The rules are designed to cover not just development companies, but also offshore holding companies and even individuals.
The rules will, however, differentiate between UK land trades and activity elsewhere, as they will seek to claim tax only on the UK element of the activity.
The new rules come into effect at the reporting stage of the bill’s reading in June. Until then the HMRC is seeking comments from the industry on any unintended consequences of the new legislation.
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