Welcome to the March edition of the Proskauer UK Tax Round Up. As promised, the Spring Statement from the Chancellor focused on the economy and public finances without any major tax announcements. However, a few interesting consultation and position papers were published. We have summarised these below along with a handful of other developments since our last issue. Finally, the Finance Bill 2018 was granted Royal Assent on 15 March 2018.
UK Tax Round Up: February 2018
Welcome to the February edition of the Proskauer UK Tax Round Up. Although there have been no major developments since our last issue there have been several interesting cases published.
The New Estate Tax Law – Here Today, Gone Tomorrow
The recently enacted Tax Cuts and Jobs Act doubles the amount of property that may pass free from federal estate, gift and generation-skipping transfer taxes. However, the doubling of the exemption amount is temporary and will sunset after 2025. Proskauer’s Private Client Services Group published a client alert focused on the estate, gift and generation-skipping transfer tax changes and how those changes affect your existing estate planning documents, and also discusses planning opportunities going forward. Read the full text of this alert.
Impact of Recent Tax Legislation on M&A Transactions
This post outlines at a high-level certain provisions under the recently enacted 2017 tax legislation (Pub. L. 115-97, the “Tax Act”) that may affect M&A Transactions. Some of these rules are very complex, particularly in cross-border transactions, and this post describes them in general terms without all of their fine details. The discussion of foreign corporations below is in the context of foreign subsidiaries of U.S. groups.
Multiple Lower Effective Corporate Tax Rates
There are now multiple effective corporate tax rates and the much-despised corporate alternative minimum tax has been repealed. Because all of them are substantially below 35 percent, they may contribute to an increase in asset prices. In addition, tax benefits now may be less valuable to corporate purchasers than to non-corporate buyers.
Base Corporate Income Tax Rate—21 percent tax rate (effective for taxable years beginning after December 31, 2017). No sunset provision.
Certain Foreign Source Income Earned from the U.S (“FDII”).—Intended to attract cross-border business back to the U.S., a tax rate lower than 21 percent is now imposed on certain excess returns earned by a U.S. corporation on the sale, license or lease of property or the provision of services to an unrelated foreign party for foreign use or consumption. (Additional rules apply when the transaction is with a related party.) In broad terms, the lower rate applies to the foreign source income from these transactions in excess of 10 percent of the corporation’s allocable depreciable tangible property basis.
UK Tax Round Up: January 2018
Welcome to the January 2018 edition of the Proskauer UK Tax Round Up. This month has been fairly quiet from a tax perspective, which provides a welcome respite from the busy end to 2017. Please view this month’s issue of the UK Tax Round Up.
New Tax Law (H.R. 1): Key Highlights Related to Interest Bearing Debt
On Friday December 22, 2017, the President signed into law H.R.1, commonly referred to as the Tax Cuts and Jobs Act (TCJA). This is the most sweeping change to the US federal income tax laws in over three decades, and it will affect every US taxpayer, including participants in the capital markets. The purpose of this blog post is to focus on some of the provisions of the TCJA that will impact interest bearing debt, including leveraged loans and high-yield bond offerings. For background and a more detailed discussion of the TCJA provisions generally, please see, House of Representatives and Senate Conferees Reach Agreement on the Tax Cuts and Jobs Act (H.R. 1).
New Tax Law (H.R. 1): Key Highlights for Private Investment Funds
H.R. 1, commonly referred to as the Tax Cuts and Jobs Act, implements sweeping changes to the U.S. tax system. These changes will alter the fundamental tax principles upon which many investment and organizational decisions by the private investment industry were made.
Lawyers in our Tax and Private Investment Funds groups hosted a 1-hour webinar highlighting the key provisions of the new tax law, its implications on the private investment industry, and action items for the private investment community in the coming year and beyond.
Key changes include:
Tax Rates/Taxable Income
- 21% corporation; 37% individuals
- Non corporate taxpayers eligible for 20% deduction of certain pass through income
- Carried interest rule
- Non-U.S. persons subject to tax on gains from sale of pass through entities that conduct a U.S. business
- U.S. corporations not subject to tax on certain foreign source dividends
Deductions
- Elimination of certain previously itemized deductions
- Limitation on NOLs
- Limitation on tax exempts to use losses to offset other income
- Accelerated depreciation
- Limitation on interest deductions
