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UNITED KINGDOM
– Overview
www.taxdirectorshandbook.co.uk
346
UK tax system: increasing
its appeal to corporates
A
lot has happened in the UK
on the tax front in the last
couple of years, and more
changes are in the pipeline.
Two key themes have emerged:
• An acknowledgement that corporate
taxation must not get in the way
of UK companies being the best
that they can be, both domestically
and internationally, balanced by a
need to replace revenues from other
sources.
• Efforts to improve the quality of
the tax code and shed a reputation
for being an over-engineered,
unpredictable tax jurisdiction, again
balanced by an increased focus on
good compliance behaviours.
Good news for corporates
Headline news is that the main rate of
UK corporation tax for the 2011/12
tax year has been reduced to 26% and
the current government has announced
its intention to reduce this rate by 1% per
annum until it reaches 23% for 2014/15.
The UK has also introduced a
corporation tax exemption for all
dividends, UK and non-UK, and an
exemption from corporation tax on
profits made by non-UK branches.
Changes are also being made to the UK
controlled foreign companies (CFC)
rules (broadly equivalent to US sub-part
F rules) to tailor them more closely to
situations where there is an artificial
diversion of profits from the UK, and
to prevent them applying to bona fide
foreign profits. It is not official UK policy
to tax only UK source profits, but for
many UK companies, this is likely to be
the result in practice.
There is also considerable focus on
encouraging innovative technologies
in the UK with enhanced tax reliefs for
research and development activities,
amortisation reliefs for intangibles and
the new special 10% rate for income
within the UK ‘patent box’ regime.
The UK has, for some years, had a
participation exemption for capital gains
on substantial shareholdings within
trading groups and joint ventures. The
UK does not impose any withholding
Presented by Maryanna Sharrock,
tax partner at Stephenson Harwood