There is little doubt that businesses in the UK understand the principles of the OECD’s BEPS project, but how they deal with the specific recommendations of the Action Plan will depend upon the effectiveness of the implementation phase.
The scale of the BEPS project is unparalleled, both in terms of the breadth of the areas it covers and, for many Actions, the extent of the changes it is proposing. Some Actions, for example those included in the transparency workstream, will impact every business with any element of international activity. The challenge here will be to balance the reporting and documentation obligations whilst minimising the adverse impacts of this on the ongoing business activities.
Clarity in implementation is key. For example, we would like to see the proposals in relation to interest deductibility take into account the many representations already made; this Action will potentially affect any group with material intra-group financing arrangements. The proposals in relation to Permanent Establishments are also resulting in a high level of interest as they suggest fundamental changes to well established principles; it is important that any changes drive towards less, not more, ambiguity of where the boundaries of taxing profits are drawn.
For UK headed multinationals, we expect there to be a general acceptance of the BEPS proposals, providing they are implemented in an appropriate manner with adequate input from business. A key challenge for tax departments will be to articulate to the Board the impact of BEPS on the organisation, particularly where clients operate in jurisdictions which have been less enthusiastic about BEPS (and which may therefore be less inclined to implement the proposals, or much slower to do so).