Corporate Tax
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It is hard to remember a time when the UK’s tax competitiveness has been more in the spotlight in the lead up to a Budget. The Chancellor focussed on this when discussing business taxation in his speech and asserted that the UK had a “stable tax regime”. This was followed immediately by HMRC publishing an extraordinary 107 separate Budget Notes, many of which were on the subject of corporate tax. Anti-avoidance measures and finalisation or updates on numerous pre-announced areas dominated the content.
Included within the 107 Budget Notes was the welcome confirmation of the reduction to a 28% headline rate but there was also a raft of anti-avoidance measures around financing structures and the way in which UK head-quartered companies’ foreign profits are taxed. Many companies, particularly big multi-nationals, will face a hike in the effective tax rate they pay on their worldwide profits as a result, arguably making the UK less competitive as a head quarter location for the world’s largest corporations.
One announcement that big businesses will welcome is the deferral until Finance Bill 2009 of the measures set out in the December 2007 consultation document entitled “Principles-based approach to financial products avoidance”. While KPMG has no general objection to principles-based legislation, we, like many other organisations, lobbied strongly against introduction of these rules in April 2008 on the basis that the draft legislation was flawed and did not achieve its stated objectives. We are very pleased that the Government has listened to business on this occasion and is allowing more time for consultation.
In the lead up to the Budget there was much speculation that we might see the next instalment in the most significant area of forthcoming change for most large corporates, the taxation of foreign profits. Following on from last June’s controversial discussion document and the ongoing dialogue between the Government and business, a further consultation document has been widely anticipated. However, the only mention of this extremely important topic was tucked away on page 44 of the Budget report (the “red book”) where it was stated that “the Government will bring forward proposals and publish a consultation document before summer 2008”. Some currently UK headquartered businesses may decide that they will not bother to wait for it.
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The Budget proposals and other tax changes are summarised on these pages. The proposals may, however, be amended significantly before enactment. The content of this communication is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining liability to tax or determining investment strategy in specific circumstances. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.
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