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1313thth October 2004 October 2004Paul Lawes, Tax ManagerPaul Lawes, Tax Manager
Virgin Management LimitedVirgin Management LimitedUK-UK Transfer PricingUK-UK Transfer PricingOECD Model – Article 8OECD Model – Article 8Tax Aspects of Aircraft LeasingTax Aspects of Aircraft Leasing
1313thth October 2004 October 2004Paul Lawes, Tax ManagerPaul Lawes, Tax Manager
Over 5 years at Virgin Management LtdOver 5 years at Virgin Management LtdTeam of 8 in direct tax, 2 in VATTeam of 8 in direct tax, 2 in VATCorporation tax compliance & adviceCorporation tax compliance & adviceEmployment tax advice Employment tax advice Planes, trains & automobiles……soon to Planes, trains & automobiles……soon to
be spaceships!!be spaceships!!
A little bit about meA little bit about me
1313thth October 2004 October 2004Paul Lawes, Tax ManagerPaul Lawes, Tax Manager
UK-UK Transfer Pricing UK-UK Transfer Pricing Key IssuesKey Issues
Inland Revenue to adopt a risk based Inland Revenue to adopt a risk based approachapproach
Areas of concernAreas of concern Transport issuesTransport issues Interest free loans.Interest free loans. Intercompany loan guaranteesIntercompany loan guarantees.. Intragroup royaltiesIntragroup royalties In-house group services.In-house group services. Contracted-out services passed on to group.Contracted-out services passed on to group. Low marginal tax rate vs standard tax rate businessesLow marginal tax rate vs standard tax rate businesses..
1313thth October 2004 October 2004Paul Lawes, Tax ManagerPaul Lawes, Tax Manager
Interpretation of Article 8 Interpretation of Article 8 OECD Treaty ModelOECD Treaty Model
Purpose Purpose Article 8 states that; Article 8 states that; ““Profits from the Profits from the
operation of ships or aircraft in international operation of ships or aircraft in international traffic shall be taxable only in the contracting traffic shall be taxable only in the contracting state in which the effective management of state in which the effective management of the enterprise is situatedthe enterprise is situated””
Interpretation of Article 8 Interpretation of Article 8 OECD Treaty ModelOECD Treaty Model
Ancillary servicesAncillary services Scope for the inclusion of a tourist business providing other travel Scope for the inclusion of a tourist business providing other travel
services such as accommodation and trips? services such as accommodation and trips?
Where is the cut off point? Where is the cut off point? Card Protection Plan Ltd v Commissioners ECJ Case C –349/96Card Protection Plan Ltd v Commissioners ECJ Case C –349/96 ““A service must be regarded as ancillary to a principal service if it does A service must be regarded as ancillary to a principal service if it does
not constitute an aim in itself, but a better means of enjoying the not constitute an aim in itself, but a better means of enjoying the principal service supplied.”principal service supplied.”
ConclusionConclusion More clarityMore clarity Consider Article 7 Business ProfitsConsider Article 7 Business Profits
1313thth October 2004 October 2004Paul Lawes, Tax ManagerPaul Lawes, Tax Manager
Tax Aspects of Aircraft Tax Aspects of Aircraft LeasingLeasing
FA 2004 changes to the taxation of FA 2004 changes to the taxation of leasesleases No overhaul yet!No overhaul yet! Double benefit leasingDouble benefit leasing Trend in anti avoidance lawsTrend in anti avoidance laws
1313thth October 2004 October 2004Paul Lawes, Tax ManagerPaul Lawes, Tax Manager
Tax Aspects of Aircraft Tax Aspects of Aircraft LeasingLeasing
ConclusionsConclusions Operating leases are becoming Operating leases are becoming
more attractive. more attractive. Airlines looking for cash benefits. Airlines looking for cash benefits. Budget 2005 – EU law challenge?Budget 2005 – EU law challenge?
1313thth October 2004 October 2004Paul Lawes, Tax ManagerPaul Lawes, Tax Manager