International Fiscal Association meeting | KPMG | UK

International Fiscal Association meeting – 24 June 2016

International Fiscal Association meeting

HMRC and HM Treasury gave updates at the meeting on a number of international tax issues.


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The most recent meeting of the International Fiscal Association (IFA) took place on 24 June 2016, and was attended by senior figures from HM Treasury and HMRC. The sessions focused on areas of tax such as business tax reform, the OECD’s Base Erosion and Profit Shifting (BEPS) project and the proposed multilateral instrument to modify existing bilateral tax treaties, as well as intellectual property. Following the vote to leave the European Union last week, the session also briefly touched on the potential tax impact of Brexit.


Understandably, given the timing of the meeting, there was no concrete information on what the vote to leave might mean for business taxation in the UK. It is likely that legislation currently constrained by EU rules will be reviewed, and there has been speculation that further corporation tax rate cuts could be due.

OECD Multilateral Instrument (MLI)

The OECD’s current objective is to conclude the text of the proposed multilateral agreement by 31 December 2016, with 96 countries attending the discussions along with a number of other observer countries. The MLI will not be compulsory, and detailed commentary on it will be produced by the OECD.

The MLI will cover the treaty aspects of hybrid mismatch arrangements (Action 2), prevention of treaty abuse (Action 6), avoidance of permanent establishment (PE) status (Action 7), and improving dispute resolution (Action 14). A number of countries have committed to mandatory binding arbitration, although some issues remain to be addressed, including whether all taxes should be included.

The UK has 96 treaties, 75 of which could be subject to the MLI. The MLI will be brought into effect in UK law following normal legal procedures. Following agreement on the MLI, HMRC intend to produce consolidated treaties and agree these on a bilateral basis, so that all agreed wording is in one place for each bilateral treaty. This consolidated version of the treaty will have no status in law, but will give guidance on what the parties intended.

Interest restrictions

There are a number of areas which need further work including the treatment of derivatives and the definition of ‘public benefit’. There may also be an implicit carve out for the financial services sector. One of the attendees expressed concerns that the fast pace of implementation might result in problems with the legislation, to which HMT replied that the timetable for implementation was being driven by ministers.

Personal service companies

The difference between the personal tax rate and corporate tax rate inevitably gives rise to disguised employment using personal service companies. Stopping this is a key priority for HMRC and HMT.

Intellectual property

As well as covering recent developments in the UK taxation of intellectual property, including changes in Finance Bill 2016-17, there were also discussions around the taxation of intellectual property in the US and the Netherlands.


For further information please contact :

Deborah Green

Sarah Beeraje 

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