Business publisher UBM is considering relocating its tax status to Britain after proposed changes to the rules on controlled foreign companies (CFC) designed to stop multinationals relocating abroad.
The Government on Wednesday outlined a reform of the CFC and "foreign branches" rules that will cost the Exchequer £2.8bn over five years in lost corporation tax revenues but aims to land the bigger prize of making Britain far more competitive for multinationals. That came alongside a cut in corporation tax from 26pc in 2011 to 23pc by 2014-15.
Alongside WPP and Shire, UBM led moves to relocate to Ireland to escape the punitive CFC rules. Robert Gray, UBM's chief financial officer, said on Wednesday: "In the light of the reform proposals, UBM is actively considering whether to relocate its corporate tax domicile to the UK."
Sir Martin Sorrell, WPP's chief executive, was less categoric but said the reforms were "definitely in the right direction". He said WPP needed to "participate in consultation, see draft legislation and final implementation" but believed the reforms fulfilled the Government's "promises about ensuring Britain is open for business".
Britain's CFC regime applies to companies controlled from the UK but resident in an overseas territory where they are subject to lower rates of taxation. Under the present rules, companies can be required to make up much of any tax shortfall.
The Government will introduce new CFC rules in the 2012 finance bill "to allow groups based in the UK to compete more effectively with those based overseas, while protecting against artificial diversion of UK profits".
In particular, the new rules will allow a company set up to finance subsidiaries abroad to pay only a quarter of the prevailing corporation tax rate – or 5.75pc by 2014.
David Norton, senior tax partner at Deloitte, said the rule change acknowledged that the previous Government had "swung too far in seeing any offshore companies as vehicles for tax avoidance".
Toby Ryland, a senior tax partner at Blick Rothenberg, said: "The Chancellor clearly wants to encourage multinational companies to stay in the UK."
The 2012 rule change will see the Government forgo £210m in 2012/13 rising to £840m by 2015/16 – but that should be outweighed by the benefits of keeping companies and jobs in Britain.
Companies also welcomed exemptions on the profits of "foreign branches" – a move particularly welcomed by the insurance industry as the EU Solvency II regulations require branches to hold less capital than overseas subsidiaries.
Source: http://www.telegraph.co.uk
The Government on Wednesday outlined a reform of the CFC and "foreign branches" rules that will cost the Exchequer £2.8bn over five years in lost corporation tax revenues but aims to land the bigger prize of making Britain far more competitive for multinationals. That came alongside a cut in corporation tax from 26pc in 2011 to 23pc by 2014-15.
Alongside WPP and Shire, UBM led moves to relocate to Ireland to escape the punitive CFC rules. Robert Gray, UBM's chief financial officer, said on Wednesday: "In the light of the reform proposals, UBM is actively considering whether to relocate its corporate tax domicile to the UK."
Sir Martin Sorrell, WPP's chief executive, was less categoric but said the reforms were "definitely in the right direction". He said WPP needed to "participate in consultation, see draft legislation and final implementation" but believed the reforms fulfilled the Government's "promises about ensuring Britain is open for business".
Britain's CFC regime applies to companies controlled from the UK but resident in an overseas territory where they are subject to lower rates of taxation. Under the present rules, companies can be required to make up much of any tax shortfall.
The Government will introduce new CFC rules in the 2012 finance bill "to allow groups based in the UK to compete more effectively with those based overseas, while protecting against artificial diversion of UK profits".
In particular, the new rules will allow a company set up to finance subsidiaries abroad to pay only a quarter of the prevailing corporation tax rate – or 5.75pc by 2014.
David Norton, senior tax partner at Deloitte, said the rule change acknowledged that the previous Government had "swung too far in seeing any offshore companies as vehicles for tax avoidance".
Toby Ryland, a senior tax partner at Blick Rothenberg, said: "The Chancellor clearly wants to encourage multinational companies to stay in the UK."
The 2012 rule change will see the Government forgo £210m in 2012/13 rising to £840m by 2015/16 – but that should be outweighed by the benefits of keeping companies and jobs in Britain.
Companies also welcomed exemptions on the profits of "foreign branches" – a move particularly welcomed by the insurance industry as the EU Solvency II regulations require branches to hold less capital than overseas subsidiaries.
Source: http://www.telegraph.co.uk
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