23 04 2018

UK Revisits Proposed BEPS Changes To Its Double Tax Treaties

The UK tax agency, HM Revenue and Customs, on April 16, 2018, released proposed changes to the list of amendments it intends to make to its bilateral double tax avoidance agreements through the OECD's base erosion and profit shifting multilateral instrument.

The new document – Proposed changes to the provisional list of UK reservations and notifications under the MLI as made at signature – updates the UK's proposed policy set out when it first signed the MLI.

The BEPS MLI, developed through negotiations involving more than 100 countries and jurisdictions as part of the OECD's BEPS project, is intended to enable countries to incorporate BEPS-related amendments into their tax treaties without having to renegotiate bilateral treaties on a piecemeal basis. It is due to enter into force on July 1, 2018.

The OECD's MLI is intended to revise treaties to deny treaty benefits in inappropriate circumstances. It will implement minimum standards to counter treaty abuse (BEPS Action 6), prevent the artificial avoidance of permanent establishment status (BEPS Action 7), neutralize the effects of hybrid mismatch arrangements (BEPS Action 2), and improve dispute resolution mechanisms (BEPS Action 14).

The MLI is designed to provide flexibility to accommodate specific tax treaty policies. The UK has set out which of its tax treaties will be covered under the MLI and how they will be amended in a document hosted by the OECD: "United Kingdom BEPS MLI Position – reservations and notifications." The new document includes amended policies to be included in that document.

Separately, this month, the UK Government tabled The Double Taxation Relief (Base Erosion and Profit Shifting) Order 2018 to ratify the BEPS MLI, thereby confirming its participation in the framework.

According to HMRC, the changes set out in the new document are intended to:

Amend errors in the original notifications;
List Agreements that were omitted from the original list in error;
List Agreements that have been signed since signature of the MLI; and
Remove from the list Agreements where it has been agreed with the UK's treaty partners to make the modifications provided by the MLI instead through a bilateral arrangement.
HMRC said the UK's final list of reservations and notifications under the MLI will be that submitted to the OECD (as the Depository of the MLI) on deposit of the UK's instrument of ratification following completion of legislative procedures to give effect to the draft Double Taxation (Base Erosion and Profit Shifting) Order 2018.