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HMRC internal manual

International Manual

HM Revenue & Customs
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International movements of capital: What information should the report include?

FA09/SCH 17/ Para 4 and Regulation 3 of S.I. 2009 / No. 2192

The report must include such information relating to the event or transactions as is specified in the regulations made by HMRC. The purpose of the report is to enable HMRC to consider whether or not the event or transaction gives rise to an advantage in relation to UK taxation.

Regulation 3 deals with the information which a reporting body is required to provide. It provides that the information required as it relates to a foreign subsidiary is its name and the territory from which it derives its status as a body corporate. The report should also contain a full description of the steps taken in the course of a transaction including in particular the date, the names of the parties, the reasons for it, and an estimate of its effect on liability to United Kingdom tax.

It can be seen from these provisions that the new reporting requirement takes a different approach to that under S.I. 1990 / No. 1671 which set out in some detail what was to be supplied under ICTA88/S765A (see INTM700110). When compiling a report under Schedule 17 businesses should bear in mind the purpose of that report when viewed from HMRC’s perspective.

The legislation states that the reports are intended to enable HMRC to consider whether or not the event or transaction gives rise to an advantage in relation to UK taxation. This is a fundamental element of the department’s work in assessing UK tax risks. The reports are therefore intended to play a part in the ongoing risk assessments carried out on all major groups. With this in mind a business needing to make a report ought to ensure that it is sufficiently detailed to make the consequences of the transaction clear. There is no advantage for either HMRC or businesses if additional information has to be sought (whether under formal information powers or not) because the report is insufficient.

To this end, for example, the inclusion of key documents relating to a particular transaction is to be encouraged. A particular agreement is likely to contain a great deal of factual information about the parties involved and the steps taken. Similarly, in multi-stage transactions a diagrammatic approach setting out what has happened will in most cases provide a more effective report than one that relies solely on description, although a narrative element will usually be required.

The extent to which the tax effect of a particular transaction can be estimated will vary from case to case. A distinction might be drawn between transactions planned and intended to generate a UK tax advantage and those which might well have such an effect but not in a precisely quantifiable manner. An estimate may therefore not necessarily be expressed in terms of a certain sum of money each year but as a narrative of the likely consequences. HMRC recognises that a reasonable estimate of the tax effect of some transactions may not be possible. In such cases it would be appropriate to include a brief description of the reasons for this.