Responses to consultation sent a ‘strong message’ that applying the proposed tax exemption for overseas branch profits to all territories, and the inclusion of chargeable gains, would enhance the competitiveness of the UK regime, HM Treasury said.
Most respondents acknowledged that an anti-diversion rule, to prevent the exemption being used to artificially reduce UK taxable profits, was necessary to protect the Exchequer. But many thought the scope of the rule was too wide and created uncertainty.
‘Until full controlled foreign company reform is legislated the anti-diversion rules in the 2011 Finance Bill will apply to the profits of exempt branches,’ the Treasury said. Proposals for the application of the reformed CFC rules to branches will be published as part of the CFC consultation document later this month.
The Treasury has estimated the measure will result in a revenue loss of £100 million a year but hopes the UK will gain a competitive edge.
However, campaigners have slammed the proposal. The Guardian columnist George Monbiot claimed that the reform will be 'the biggest and crudest corporate tax cut in living memory'.
One member of the public responded to the consultation and several other informal responses were received after the closing date, the Treasury said in its summary of responses. ‘These responses objected to the principle of giving tax reductions to companies in the current economic climate and were concerned that the proposals would act as an incentive for businesses to move profits offshore.’
But the Treasury argued that the changes will help to achieve the government’s aim of ‘creating the conditions that encourage businesses to locate and invest in the UK’, and the anti-diversion rules will ‘prevent the branch exemption being used to artificially reduce UK taxable profit’.
Responses to consultation sent a ‘strong message’ that applying the proposed tax exemption for overseas branch profits to all territories, and the inclusion of chargeable gains, would enhance the competitiveness of the UK regime, HM Treasury said.
Most respondents acknowledged that an anti-diversion rule, to prevent the exemption being used to artificially reduce UK taxable profits, was necessary to protect the Exchequer. But many thought the scope of the rule was too wide and created uncertainty.
‘Until full controlled foreign company reform is legislated the anti-diversion rules in the 2011 Finance Bill will apply to the profits of exempt branches,’ the Treasury said. Proposals for the application of the reformed CFC rules to branches will be published as part of the CFC consultation document later this month.
The Treasury has estimated the measure will result in a revenue loss of £100 million a year but hopes the UK will gain a competitive edge.
However, campaigners have slammed the proposal. The Guardian columnist George Monbiot claimed that the reform will be 'the biggest and crudest corporate tax cut in living memory'.
One member of the public responded to the consultation and several other informal responses were received after the closing date, the Treasury said in its summary of responses. ‘These responses objected to the principle of giving tax reductions to companies in the current economic climate and were concerned that the proposals would act as an incentive for businesses to move profits offshore.’
But the Treasury argued that the changes will help to achieve the government’s aim of ‘creating the conditions that encourage businesses to locate and invest in the UK’, and the anti-diversion rules will ‘prevent the branch exemption being used to artificially reduce UK taxable profit’.
