The United Kingdom published new legislation on October 29, 2018 that seeks to subject UK-derived income with respect to intangible property (IP) to UK income tax at 20% on the gross receipts, where the IP is held offshore in a ‘low-tax’ jurisdiction. This law became effective on April 6, 2019.
On May 24, 2019, HMRC published further draft regulations and guidance with respect to these ‘Offshore Receipts’ rules, which are subject to consultation until July 19, 2019. Generally, relieving provisions introduced by the regulations will be retroactive, whereas provisions that expand the scope will apply once regulations are passed.
The Offshore Receipts tax is the UK’s most recent unilateral measure that seeks to discourage multinational businesses from holding intangible property in low-tax jurisdictions, where separate from the relevant economic substance.
Multinational businesses should actively review the broad scope of the Offshore Receipts provisions and draft regulations, in order to understand the material implications for existing global operating models.