Draft legislation on tax treaty avoidance now withdrawn

Draft legislation was published on August 1, 2011, intended to stop individuals, companies and other persons benefitting from the provisions of a double taxation agreement where the claim is part of an arrangement the main purpose of which is to reduce a liability to UK tax. In response to adverse consultation feedback that the proposals could cause signifi cant uncertainty for UK business and overseas investors into the UK about the availability of treaty benefits, the Government has now decided not to proceed with the draft legislation. This is a welcome development for anyone considering structuring using companies in favourable treaty jurisdictions to reduce taxes.