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Aim to enhance UK’s competitiveness

09 August 2010
Issue: 4267 / Categories: News , Anneli Collins , CFCs , Peter Cussons , Companies
Proposed reforms to foreign branch regime and CFCs

The Government has signalled its intention to reform the taxation regime for foreign branches of UK companies, in a discussion document released for public consultation.

The aim of the proposed reforms is to ‘enhance the UK’s competitiveness and to achieve greater consistency of tax treatment between branches and subsidiaries’.

The document sets out options and proposals for the scope of an exemption regime for foreign branches, as well as options for consideration regarding the relief of losses incurred in foreign branches.

PricewaterhouseCoopers’ EU tax partner, Peter Cussons, said the discussion document was ‘very much in line with [the Government’s] “open for business” strapline’.

He added: ‘The consultation on alternative loss relief is very welcome, although it is noted there is no reference to allowing foreign exchange losses on closure of EU foreign branches’.

CIOT president Vincent Oratore said: ‘This is a... welcome step forward in achieving a level playing field for foreign profits.

‘However, putting together a tax regime that enables British players... to be competitive internationally... will be a big challenge for the Government.’

The other tax consultation documents recently released by the Treasury included a short note on controlled foreign companies (CFCs) interim improvements, which will be introduced next spring.

The aim of the planned changes is to make the current rules easier to operate and increase competitiveness where possible, by doing the following:

  • exempting ‘commercially justified’ activities that both HMRC and business agree ‘do not erode the UK tax base, but which could give rise to a CFC charge under the current rules’;
  • assisting UK businesses undertaking overseas reorganisations and acquisitions, possibly by, for example, extending the scope and length of the ‘grace period’; and
  • including ‘other worthwhile improvements suggested during consultation’.

KPMG’s head of tax policy, Anneli Collins, said: ‘It’s crucial that UK plcremains engaged in the dialogue and fully participates in the debate over the next few weeks’.

Issue: 4267 / Categories: News , Anneli Collins , CFCs , Peter Cussons , Companies
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