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The government is taking action to stop people avoiding tax by using rules known as compensating adjustments.
This follows the Chief Secretary to the Treasury Danny Alexander’s announcement on Tuesday 17 September concerning proposals to reduce tax avoidance involving ‘compensating adjustments’ in the transfer pricing code.
The rules, which are designed to avoid double taxation between individuals and connected companies, are increasingly being used by individuals to reduce their income tax bill.
Following a period of informal consultation on technical detail the government is publishing draft legislation for inclusion in Finance Bill 2014 effective from 25 October which changes the law to remove this avoidance opportunity.
This technical note includes draft legislation with detail designed to explain the operation of the new rules.