The European Commission also referred the UK to the European Court of Justice (ECJ) on account of UK anti-avoidance measures which concern the transfer of assets abroad and attribution of gains to members of non-UK resident companies. On the attribution of gains issue, under UK legislation, a parent company in the UK is taxed for the capital gains of its subsidiaries in other Member States, while no similar taxation exists when subsidiaries are located in the UK. The taxation of assets abroad issue centres on the taxation of UK residents who invest capital in a company in another Member State. Such investors are subject to UK income tax on income generated by the company, even where the income has not been distributed to the investor. However, if a UK resident invests capital in a UK company, the investor will not be taxed until the company makes a distribution to him.

The Commission is of the opinion that the two anti-avoidance measures in question impose disproportionate restrictions which go beyond what is reasonably necessary to prevent abuse or tax avoidance. In the Commission's view, both rules impose restrictions on the freedom of establishment and the free movement of capital which is contrary to EU rules

The referral to the Court of Justice is the last step in the infringement procedure.

HMRC undertook a consultation on proposed changes to the two anti-avoidance laws now going before the ECJ as previously reported in tax.point.

For further details on the taxation of assets abroad issue see http://europa.eu/rapid/press-release_IP-12-1147_en.htm

For further details on the taxation of capital gains issue see http://europa.eu/rapid/press-release_IP-12-1146_en.htm