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UK Budget 2013 Reduces CIT but MNCs Continue to Resist Investment
Taxand UK takes a look at key tax highlights from Budget 2013 with a particular focus on the hot topic of promoting multinational investment in the jurisdiction.
The Chancellor delivered the Budget with a number of references to a competitive tax system and the headline corporation tax rate was reduced further to 20% to try to stimulate investment. However many international groups in high tax locations (such as the US) are resisting investing in the UK due to the uncertainity and reputational risk associated with tax planning and tax rate arbitrage.
There is an opportunity for the UK to help shape the debate on base erosion through profit sharing and ensure that legitimate, commercially based planned is not tarred with the same brush as aggressive, artificial tax avoidance. The UK General Anti-Abuse Rule (GAAR) does in fact concentrate on aggressive structures with commercial planning unaffected. In addition, the paper isued by HRMC yesterday on offshore evasion (entitled "No Safe Havens") is aimed at individuals evading tax through fraudulent means and not at commercially based planning by corporates.
Other key tax changes announced today include:
- An increase in the bank levy to fund the corporation tax reduction
- Confirmation that the GAAR will be effective for "abusive tax arrangements" entered into on or Royal Assent to Finance Bill 2013
- Improved research and development tax credits in parallel with the UK patent box regime that goes live in April 2013
After a year of highly publicised corporate tax 'scandals', the UK Budget announcement was awaited with baited breath. In the current economic climate promoting the jurisdiction as a key investment centre is key, something the recent tax debate has done little to help. Reputational damage is a grave concern for business as customers may not be aware of the key distinction between substantive planning and artifical schemes. If this opportunity to end the uncertainity around planning is not grasped by policy makers, businesses and advisers then the positive changes to the UK tax system in recent years will have been in vain.