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Chancellor Reduces in UK Corporate Tax Rate
It is a known objective of the Chancellor to bring down the rate of corporate tax in line with the small companies' rate of 20%, so the reduction itself was not the surprise. The timing of the announcement against the current economic backdrop was the unexpected move. The message is that despite the current bad press for multinationals who are benefitting from a tax arbitrage, for those businesses operating in a higher tax location, the UK is very much open for business so please do come and invest here. Taxand UK details this announcement and its impact on businesses around the world.
Over the last few months, the UK press has been dominated by articles attacking the practice of global businesses - the argument being that the public do not believe these businesses are paying their fair share of UK corporation tax, when compared to other locations. There has even been a question and answer session with the public accounts committee, which was hostile and challenged the "morality" of legitimate tax planning.
But, while this reporting is dominating public debate, something else is happening to the UK tax landscape which is going largely unnoticed by the UK press. As little as 10 years ago, to consider the UK as a holding company jurisdiction would have been given little shrift. The Controlled Foreign Companies (CFC) regime, high tax rate and other key aspects of the UK tax system such as the taxation of dividends and chargeable gains, made it unattractive for multinational corporations. So unappealing was the UK, that large domestic businesses actually migrated from the UK.
Recent changes mean that the UK is becoming a competitive holding company jurisdiction. This commitment to lowering the UK corporation tax is only helping this position. Additional changes include:
- Recent changes to CFC rules
- The introduction of the UK patent box
- The introduction of the dividend exemption regime
- The introduction of creative industry tax credits
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We are seeing more and more multinationals open to moving certain holding and other operations to the UK. What is absolutely clear is that a commitment to a low corporation tax rate sends a signal overseas stating that the UK is open for business. Well done to Mr Osborne. Only 1% to go.
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