UK Law and Practice Contributed by: Russell Warren and Michael Langan, King & Spalding LLP
1. Sources and Principles 1.1 Domestic Sources of International Tax Law The main sources of international tax law in the UK are domestic tax legislation (primarily enacted by parlia - ment), secondary legislation and case law arising from UK tax tribunals and courts. Following Brexit and the enactment of the Retained EU Law (Revocation and Reform) Act 2023, the UK is no longer bound by EU tax directives. Administrative co-operation now rests on OECD instruments, the Foreign Account Tax Com - pliance Act (FATCA) and bilateral treaties. The UK has an extensive network of treaties and inter - national agreements with over 100 countries. These are designed to prevent double taxation and fiscal evasion and allow for the exchange of information. Double tax treaties are given effect by domestic leg - islation (TIOPA 2010 and statutory orders). In practice, treaties can therefore modify the application of UK domestic law. The UK’s treaties are regularly updated, especially in response to OECD Base Erosion and Profit Shifting (BEPS) initiatives. The UK also participates in multilat - eral instruments (under the OECD’s Multilateral Con - vention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS)) and follows OECD guidelines for transfer pricing and Domestic tax law is primary, but international treaties (such as double tax treaties) override domestic law where there is a conflict, provided the treaty has been incorporated into UK law by way of ratification of the relevant treaty. A double tax treaty cannot, however, impose a tax charge where one does not exist under UK domestic law. 1.3 OECD Model/United Nations Influence on Treaty Practice The UK generally follows the OECD Model Tax Con - vention in its treaty practice, with some deviations to reflect UK-specific policy or negotiation outcomes with counterparty jurisdictions. A number of these treaties (primarily with jurisdictions that were previ - country-by-country reporting. 1.2 Hierarchy of Sources
ously colonies of the UK) were entered into prior to the publication of the OECD model. The UK has also adopted specific provisions from the United Nations Model Double Taxation Convention in certain treaties with developing countries. These provisions tend to provide greater taxing rights to the counterparty juris - diction as compared to the OECD model. 1.4 Multilateral Instrument The UK signed the Multilateral Instrument (MLI) on 7 June 2017 and ratified it on 29 June 2018. It has been in effect in the UK since 1 October 2018. The date the MLI takes effect for any particular treaty with the UK will depend on the date the counterparty jurisdiction in question ratifies its signatory to the MLI.
2. Territoriality, Residence and Permanent Establishment
2.1 General Principle of Territorial Taxation The UK operates a worldwide basis of taxation for individuals who are resident in the UK. From 6 April 2025, the UK abolished the non-domicile regime so that individuals who come to the UK from April 2025 will have a maximum of a four-year tran - sitional period (which is reduced accordingly for indi - viduals arriving after 6 April 2025) where they are not subject to foreign income and gains (FIG). Following the expiry of this four-year period, individuals will be fully taxable on worldwide income and gains. There is a temporary repatriation facility for previous remit - tance-basis users to remit FIG at reduced tax rates (12% in the tax years 2025/2026 and 2026/2027 and 15% in 2027/2028). Previous remittance-basis users can also “rebase” foreign assets to their value on 5 April 2019. Non-residents are subject to tax only on UK source income (eg, UK rental income and income attributable to a UK permanent establishment) and gains arising directly or indirectly on UK real estate. There are devolved taxes in Scotland, Wales, and Northern Ireland, with some local variations (eg, Land and Buildings Transaction Tax in Scotland).
485 CHAMBERS.COM
Powered by FlippingBook