Horwath Clark Whitehill - Corporate Taxes Update - 12 May 2008

Apr 6, 2009 | Publisher: CroweClarkWhitehill | Category: Business & Jobs |  


A summary of the latest UK tax news www.horwathcw.com Corporate Taxes Update 12 May 2008 In this issue: • Multi-nationals consider migration away from the UK • Government moves forward to tackle climate change • P11D hints Multi-nationals consider migration away from the UK Following the decision by Shire Pharmaceuticals and United Business Media to move their holding companies away from the UK it is feared that many other UK-based multi- nationals may follow suit. As Chancellor, Gordon Brown promised to have a tax regime that combines flexibility with stability resulting in reduced compliance costs and a framework for innovation. But multi-nationals are concerned about the proposals announced in a consultation document (condoc) in 2007 regarding the UK tax treatment of foreign profits. Under current rules a UK company with overseas subsidiaries is taxed on dividends when they are received from those subsidiaries. The UK allows the foreign tax paid by the subsidiaries as a credit against the UK tax liability on those dividends. Often no further UK tax is payable - the net effect is therefore a UK compliance obligation. The UK also has complicated controlled foreign company rules whereby in certain circumstances profits of subsidiaries located in overseas tax-favourable regimes are taxed in the UK even if they are not remitted to the UK. Initially there was excitement that the condoc would make the UK more attractive to multi-national groups because the government proposed that dividends paid to the UK would be tax exempt. However on closer analysis it seems that the cost of this exemption is that the UK may tax what it considers to be ‘mobile income’ i.e. income that HMRC judges could be moved anywhere in the world e.g. from financing arrangements or Intellectual Property. Multi-nationals are therefore reviewing their options. Many may establish a holding company outside of the UK and transfer all overseas subsidiaries to that company. The group head office function could continue to be located in the UK but providing the strategic decisions by the full board are taken outside of the UK this should mean that only profits of the UK entities would be taxed in the UK. Chancellor, Alistair Darling has responded by announcing a new business-government working group: “…with industry representatives to discuss ways in which the tax system can provide the long-term certainty multi-national companies need…” From reports it is clear that there will not be a shortage of volunteers to join this group - a number of organisations have made approaches to join the group presumably hoping to shape policy. Meanwhile other businesses wonder whether this is the start of another U-turn by the government. For some affected companies this might be a good time to review their options with their professional advisers. Corporate Taxes Update A summary of the latest UK tax news www.horwathcw.com 12 May 2008 For more information please contact: Chris Denning Tax Partner chris.denning@horwath.co.uk Stuart Weekes Senior Tax Manager stuart.weekes@horwath.co.uk Horwath Clark Whitehill LLP Aquis House 49-51 Blagrave Street Reading, RG1 1PL Telephone: 0118 959 7222 Fax: 0118 958 4640 Government moves forward to tackle climate change The Technology Strategy Board (TSB) has announced two initiatives regarding road transport and housing to tackle climate change and meet UK carbon emissions targets. The Low Carbon Vehicles Innovation Platform is due to receive £23 million of government investment to support 16 innovative new projects. These projects which are considering light-weighting, fuel type, aerodynamics and engine developments are being led by a range of organisations from spin out companies to small and medium- sized organisation and major manufacturers. The Low Impact Buildings Innovation Platform has announced that £30 million of funding will be available over three years to enable the TSB to work with industry, academics and research organisations to develop new products and services to bring to market. The hope is that these will help industry meet the government’s targets of zero- carbon homes and industrial buildings in the future. As reported previously there are various tax incentives for businesses and consumers who make ‘green’ acquisitions. Carbon emissions are used to determine the tax payable on company car benefits and capital allowances on cars are due to be based on carbon emissions from April 2009. There is also a Stamp Duty Land Tax (SDLT) exemption for certain investment in zero-carbon homes. These latest announcements indicate that the government is still driven to achieve these carbon targets; could this lead to more tax incentives for green acquisitions in the future? P11D hints If you have not already done so please note that P11Ds for 2007/08 are due to be submitted by 6 July 2008. Some hints to consider when completing the forms: • electrically-propelled cars do not have a CO2 emissions reading – they have an effective benefit in kind of 9% of the list price of the car • beneficial loans – only insert a start or end date if the loan starts or ends in the tax year • company cars – only insert a start or end date if the car was provided or ceased to be made available during the tax year • mileage allowances – if paid within the authorised mileage rates they do not need to be included on the P11D. For 2008/09 establishing a P11D dispensation with HMRC for the reimbursement of business expenses (travel, entertainment etc) should save administration. Other matters • Employers: file PAYE year end returns by 19 May or face penalties. • HMRC has provided an online tutorial regarding the new penalties regime. • Finance Bill 2008 has reached the Public Bill Committee stage. This information is published without responsibility on our part for loss occasioned to any person acting or refraining from acting as a result of any information published herein. © Horwath Clark Whitehill LLP May 2008

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