LONDON: A British tax on companies that shift profits out of the country and into tax havens will target inter-company fees for services such as the use of intellectual property, according to draft legislation published yesterday.
Companies will also be required to report their potential liability to the new tax, which will sit outside the existing corporate tax system, under the changes outlined by Finance Minister George Osborne last week.
Such a move could avoid legal challenges under existing tax treaties with countries such as Ireland, a major conduit for shifted profits. Recouping cash is important to Osborne as Britain’s public finances have become a major issue in the run-up to national elections in May.
Osborne said last week that he wanted to raise a further 5 billion pounds by tightening rules on tax avoidance.
Chas Roy-Chowdhury, head of tax at accounting group ACCA, said the $1.6bn expected to be raised by the new tax over the next five years was modest given the size of the UK operations of the firms likely to be affected.
George Bull, a senior tax partner at accountancy firm Baker Tilly, was also surprised by the low amount. “Perhaps (Britain’s tax department) has deliberately downplayed these figures so that the move is seen less as a ‘money spinner’, and more about leading the reform of the taxation of international corporates?” he said in a statement.
The Treasury said the 25 percent tax would be effective from April 1, 2015, and would target conduit-type structures, such as the “double-Irish” used by Google.
Reuters
