Anti-avoidance rule will not harm Starbucks

 
Tim Wallace
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BRITAIN’S latest crackdown on tax dodging will not hit international firms embroiled in public tax rows like Starbucks, HM Revenue and Customers said yesterday, because the coffee giant is operating well within the rules.

The general anti-abuse rule (GAAR) is designed to clamp down on the most excessive accounting contortions designed to get around the precise wording of the law.

By contrast international firms that have generated headlines for paying little or no corporation tax are obeying the law as intended, HMRC said.

“Many of the established rules of international taxation are set out in double taxation treaties,” said HMRC in the guidelines published yesterday.

“These cover, for example, the attribution of profits to branches or between group companies of multi-national enterprises, and the allocation of taxing rights to the different states where such enterprises operate.”

“The mere fact that arrangements benefit from these rules does not mean that the arrangements amount to abuse, and so the GAAR cannot be applied to them.”

HMRC also clarified rules in areas like self employment, confirming taking income as dividends over several years rather than salaries in a single year, thus lowering the tax bill, will still be allowed. And it confirmed the GAAR will not cover reliefs to support business activity and investment.

Accountants at PwC welcomed the guidelines.

“This will help reassure taxpayers and prevent business being gummed up by uncertainty,” said tax partner Alex Henderson. “The guidance is also important for managing expectations – ordinary international tax arrangements are outside the GAAR’s scope.”