Introduction
1.These explanatory notes relate to the Taxation (International and Other Provisions) Act 2010 which received Royal Assent on 18 March 2010. They have been prepared by the Tax Law Rewrite project at HMRC to assist readers in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament.
2.The notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of its contents. So if a section or part of a section does not seem to require explanation or comment, none is given.
3.The commentary on each section, or rewritten provision inserted in another Act by Schedules 1 to 7, indicates the main origin or origins of the section or rewritten provision. A full statement of the origins of each section, and of the paragraphs of Schedules 1 to 7 making such insertions, is contained in the Act’s Table of Origins.
4.At the end of the commentary, there is supporting material in two annexes:
Annex 1 contains details of the minor changes in the law made by the Act.
Annex 2 contains a list of provisions not included in the Act on the grounds of redundancy.
Summary
5.The main purpose of the Taxation (International and Other Provisions) Act 2010 is to rewrite primary legislation relating to a number of provisions with an international dimension so that they are clearer and easier to use but without changing their general effect.
6.It contains provisions about double taxation relief, transfer pricing, advance pricing agreements, tax arbitrage, tax treatment of financing costs and income, and offshore funds. It also relocates and rewrites other provisions where it seems helpful to users to do so.
7.The Act reproduces the law on which it is based. It does not generally change the meaning of the law. The minor changes which it does make are within the remit of the Tax Law Rewrite project and the Parliamentary process for the Act. In the main, such minor changes are intended to clarify existing provisions, make them consistent or bring the law into line with well established practice.
Background
The Tax Law Rewrite project
8.In December 1995 the Inland Revenue presented a report to Parliament on the scope for simplifying the UK tax system (The Path to Tax Simplification). The main recommendation was that UK direct tax legislation should be rewritten in clearer, simpler language.
9.This recommendation was warmly welcomed, both in Parliament and in the tax community. In his November 1996 Budget speech the then Chancellor of the Exchequer (the Rt Hon Kenneth Clarke QC MP) announced that the Inland Revenue would propose detailed arrangements for a major project to rewrite direct tax legislation in plainer language.
10.The project team has been carrying out this work. The aim is that the rewritten legislation should use simpler language and structure than previous tax legislation. The members of the project are drawn from different backgrounds. They include HMRC employees, private sector tax professionals and parliamentary counsel including (as head of the drafting team) a senior member of the Parliamentary Counsel Office.
Steering Committee
11.The work of the project is overseen by a Steering Committee, chaired by the Rt Hon the Lord Newton of Braintree OBE DL. The membership of the Steering Committee as at 19 October 2009 was:
The Rt Hon the Lord Newton of Braintree OBE DL (Chairman)
Dr John Avery Jones CBE
Adam Broke
Nicholas Dee
Dave Hartnett CB
The Rt Hon Michael Jack MP
Eric Joyce MP
District Judge Rachel Karp
Professor John Tiley CBE
John Whiting OBE
Consultative Committee
12.The work is also reviewed by a Consultative Committee, representing the accountancy and legal professions and the interests of taxpayers. The membership of the Consultative Committee as at 19 October 2009 was:
| Robina Dyall | Chairman |
| Adam Broke | Special Committee of Tax Law Consultative Bodies |
| Colin Campbell | Formerly Confederation of British Industry |
| Russell Chaplin | London Chamber of Commerce & Industry |
| Mary Fraser | Association of Chartered Certified Accountants |
| Malcolm Gammie CBE QC | The Law Society |
| Julian Ghosh QC | Revenue Bar Association |
| Keith Gordon | Chartered Institute of Taxation |
| Terry Hopes | Institute of Chartered Accountants in England and Wales |
| Vic Peake | Federation of Small Businesses |
| Isobel d’Inverno | Law Society of Scotland |
| Simon McKie | Institute of Chartered Accountants in England and Wales |
| Lakshmi Narain | Chartered Institute of Taxation |
| Francis Sandison | The Law Society |
| Michael Templeman | Institute of Directors |
| Professor David Williams | Office of the Social Security Commissioners |
| Mervyn Woods | Confederation of British Industry |
Consultation
13.The work produced by the project has been subject to public consultation. This has allowed all interested parties an opportunity to comment on draft clauses.
14.Consultation took the form of a series of papers presenting clauses in draft and documents containing responses to comments received. These were published between September 2007 and October 2009. A draft Bill was published for consultation in March 2009. All these documents are available on the Tax Law Rewrite website.
15.In addition to this consultation the project also presented its papers to the Consultative and Steering Committees to inform them and to seek their views on particular issues. The project also consulted on an informal basis with specialists in particular subject areas.
16.Those who responded in writing to one or more of the papers or to the draft Bill include:
BDO LLP
Bircham Dyson Bell LLP
The British Property Federation
CASCS Development Forum
The Charity Law Association
Chartered Institute of Taxation
Colin Campbell
Confederation of British Industry
Dr David Williams
Ernst & Young LLP
Francis Sandison
Freshfields Bruckhaus Deringer LLP
Horwath Clark Whitehill
Institute of Chartered Accountants in England and Wales
KPMG LLP
Pinsent Masons LLP
PricewaterhouseCoopers LLP
Slaughter and May
The Law Society
The UK Oil Industry Taxation Committee
17.As there was some movement of material between this Act and the Corporation Tax Act 2010 during the course of the work on the Bills, this list includes respondents to both Bills. The list excludes any individuals who requested that their responses be treated in confidence.
Taxation (International and Other Provisions) Act 2010
18.The Act contains provisions relating to:
double taxation relief;
transfer pricing;
advance pricing agreements;
tax arbitrage;
tax treatment of financing costs and income;
offshore funds; and
relocation of provisions of tax legislation.
19.The Act has 382 sections and 11 Schedules. The sections are arranged as follows:
Part 1: Overview
Part 2: Double taxation relief
Part 3: Double taxation relief for special withholding tax
Part 4: Transfer pricing
Part 5: Advance pricing agreements
Part 6: Tax arbitrage
Part 7: Tax treatment of financing costs and income
Part 8: Offshore funds
Part 9: Amendments to relocate provisions of tax legislation
Part 10: General provisions
20.The Schedules are:
Schedule 1: Oil activities: new Chapter 16A of Part 2 of ITTOIA 2005
Schedule 2: Alternative finance arrangements
Schedule 3: Leasing arrangements: finance leases and loans
Schedule 4: Sale and lease-back etc: new Part 12A of ITA 2007
Schedule 5: Factoring of income etc: new Chapters 5B and 5C of Part 13 of ITA 2007
Schedule 6: UK Representatives of non-UK residents
Schedule 7: Miscellaneous relocations
Schedule 8: Minor and consequential amendments
Schedule 9: Transitionals and savings etc
Schedule 10: Repeals and revocations
Schedule 11: Index of defined expressions used in Parts 2 to 8
Glossary
21.The commentary uses a number of abbreviations. They are listed below.
| APA | advance pricing agreement |
| CAA | the Capital Allowances Act 2001 |
| CRCA | the Commissioners for Revenue and Customs Act 2005 |
| CTA 2009 | the Corporation Tax Act 2009 |
| CTA 2010 | the Corporation Tax Act 2010 |
| DTA | double taxation arrangement |
| DTR | double taxation relief |
| FA 1964 | Finance Act 1964 (and similarly for other Finance Acts) |
| F(No 2)A | Finance (No 2) Act |
| GAAP | generally accepted accounting practice |
| HMRC | Her Majesty’s Revenue and Customs |
| ICTA | the Income and Corporation Taxes Act 1988 |
| ITA | the Income Tax Act 2007 |
| ITEPA | the Income Tax (Earnings and Pensions) Act 2003 |
| ITTOIA | the Income Tax (Trading and Other Income) Act 2005 |
| OTA 1975 | the Oil Taxation Act 1975 |
| PRT | petroleum revenue tax |
| TCGA | the Taxation of Chargeable Gains Act 1992 |
| TMA | the Taxes Management Act 1970 |
