The draft legislation published on Friday was notable for some omissions. In particular, those awaiting draft legislation to implement the Government’s proposal to impose UK withholding tax on payments relating to the exploitation of IP rights in the UK (irrespective of the location of the payer) will have searched in vain.
The answer came in a ministerial statement issued by Mel Stride, the Financial Secretary to the Treasury, which confirmed that the Government was considering further the responses to the consultation on withholding taxes on payments relating to the exploitation of IP rights – together with the responses to certain other consultations including those relating to the intangibles regime.
This is all a bit surprising. The new withholding tax regime is intended to take effect from 1 April 2019. In accordance with the new consultation and legislative timetable, we might have expected to see some draft clauses now. Is the Government taking some time to consider the responses in detail or is it having second thoughts? Let’s hope it is the latter.
This was a bad idea in the first place. The new charge was always going to be cumbersome for business and difficult to enforce. It risked imposing additional complexity on the tax regime in particular in relation to cross border payment flows for little or no additional tax yield. If it has gone the way of the proposal to introduce secondary transfer pricing adjustments – which appeared a couple of years ago but was allowed to wither on the vine – it might be no bad thing.
For other consultations, including those relating to withholding tax on royalties, hidden economy conditionality, the intangible fixed assets regime and tax abuse and insolvency, the government is continuing to consider the responses and will respond in due course.