How legally tight are your agreements with revenue authorities?
Many companies and advisers may be thinking that the use of EU powers on State Aid is only likely to affect the largest multinational companies. However, this ignores the fact that Revenue authorities will come under increasing pressure from Parliament, the press and public to improve their yield. There is likely to be greater reluctance by the authorities to strike deals with companies that could be challenged as conferring a tax benefit.
Deal making is an integral part of settling tax disputes. Anything that makes this more difficult will slow the pace of tax resolutions and will make tax investigations more prolonged and costly. We have already seen HMRC come under heavy scrutiny for the deals that it did with Google and HSBC.
It will be interesting to see whether the new team at the Treasury take a harder line on Transfer Pricing and other International Tax issues. They also have the Diverted Profits Tax which is less than 18 months old and how much it will be used and deployed is still evolving. HMRC will need to balance the desire to attract international companies particularly after the Brexit result, with the need to enforce perceived fairness in tax transactions.
What should be clear is that boards of companies should regularly review their tax policies so that the risks are known and understood by all at the top of the company.
