HMRC far from ‘arm’s length’ with Airbnb – Zoe Wyatt
Zoe Wyatt, Partner at Andersen, comments on the news that Airbnb recently revealed in a note in its accounts that a tax inquiry by HM Revenue & Customs (HMRC) could eventually lead to legal proceedings.
Zoe’s comments were published in Investors Chronicle, 30 October 2019, and can be found here.
“Airbnb recently revealed in a note in its accounts that a tax inquiry by HM Revenue & Customs (HMRC) could eventually lead to legal proceedings. It’s probable that the disclosure is linked to the introduction of the Diverted Profits Tax (DPT) provisions in the UK, which seek to reduce the impact of profit-shifting practices employed by large multinationals, including numerous online entities. This isn’t the first salvo utilising the so-called ‘Google tax’, but it could represent a step up in HMRC’s efforts to curtail efforts by non-UK companies to avoid a UK taxable presence through “contrived arrangements”.
Zoe Wyatt, Partner at Andersen, posits that HMRC will seek to determine whether Airbnb [Ireland] has designed a corporate structure that artificially avoids creating a taxable presence by splitting out its UK-based marketing and payments processing businesses and pricing them as “low-level” services. If HMRC manages to get its hooks into Airbnb, it will not only create a precedent, but, as Zoe Wyatt points out, it helps to explain why the OECD is considering rescinding Article 9 of its Model Tax Convention, namely the ‘arm’s length principle’. This states that a transfer price on international business transactions between different arms of the same corporation should be the same as if the two companies involved were two independents.”