An income tax charge will arise on the owners of intangible property or those that are entitled to income, to the extent that income is matched to the sale of goods or services in the UK in relation to that intangible property and who are not resident in a full treaty territory.
It provides exemptions where the following conditions are met:
- Partnerships which are regarded as separate entities for tax purposes and resident in full treaty territories
- The value of UK sales is less than £10m in a tax year
- All, or substantially all, of the business activity in relation to the intangible property has taken place in the territory of residence and
- Tax paid in relation to that relevant income is at least 50% of the UK Income Tax that would otherwise arise under this measure
Any person within the same control group during the relevant tax year will be jointly and severally liable for the income tax charge.
A specific anti-avoidance and anti-forestalling rule will apply to any arrangement entered into on or after 29 October 2018, where one of the main purposes of the arrangement is to either avoid a charge or seek benefit under the double tax treaty where the benefit is contrary to the purpose of that tax treaty.
This affects large multinational groups that generate significant income from intangible property through UK sales and have made arrangements whereby that income is received in offshore jurisdictions of low/no tax.
By taxing this income, it offers a fairer playing field for businesses operating in the UK.
This measure will apply regardless of whether there is a UK taxable presence.