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The future for UK wholly owned groups is a little more positive following BPF’s meeting last week with the HMRC and Treasury to discuss industry concerns regarding the implementation of BEPS or Base Erosion and Profit Shifting. Insights achieved as a result of those conversations are broken down below.
We speculated in our April update, UK only property groups would not be too affected by the OECD 30% EBITDA fixed ratio rule. So far that’s looking to be an accurate prediction. Government representatives indicated that they are open to finding solutions to the issues faced by wholly owned UK groups should they arise during the implementation of the group ratio rule. The BPF continue to work through details on this - for example, whether use-tax or accounting figures are to be used in the group ratio calculation.
Multinational groups on the other hand, still face a heightened level of uncertainty with initial indications being that Government is less worried about the fallout of that same group calculation on them. It also appears as though representatives remain unconvinced that third party debt secured against an asset necessarily represents a low risk of tax avoidance.
As previously indicated, those groups with varying degrees of yield and leverage will need to continue to pay close attention to how BEPS evolves over the coming months ahead of the April 2017 implementation deadline.
Consultation between BPF, HMRC and Treasury also addressed how joint ventures would be assessed under the changes as well as the potential for grandfathering however, detail around these issues is still not clear.
Once again, Rachel Kelly at the BPF welcomes examples from the industry of developments that may be put at risk by the proposed changes. Residential and non-London developments would resonate particularly well with Government officials. Rachel can be contacted directly at firstname.lastname@example.org for a more in-depth summary on the BPF’s lobbying efforts to date.
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