Financial avoidance schemes can appear quite complicated. The number of companies involved may be considerable and the route taken by the funds quite tortuous. Overseas investors often need to set up complicated structures for their own tax planning purposes. However, once identified, the tax advantages of such schemes can be fairly straightforward and it is sometimes possible to defeat them.
As mentioned above, to some extent the following types of legislation have an anti-avoidance purpose and effect:
But there are also specific international anti-avoidance provisions that are not founded on the arm’s length principle, such as
There are also more general anti-avoidance provisions which, whilst not having an exclusively international application, can nevertheless be applied to tackle and deter avoidance using cross-border finance. These would include
Early detection of avoidance schemes which seek to exploit interest relief etc is very important. Some schemes are picked up by CT & VAT, International CT through reports from the Centre for Non-Residents ('CNR') in relation to claims to Double Taxation relief. Others may come to light through applications or reports made under Sections ICTA88/S765 or ICTA88/S765A. But CT & VAT, International CT also relies on Inland Revenue people in the LBO and local area offices to bring to their attention any case where borrowing by a UK company appears to have unusual or novel features.
