Tax professionals urge UK government to delay interest expense reform

The U.K. government’s timetable for implementation of a key base erosion and profit-shifting project reform is too ambitious, tax professionals have warned.

There is “no need to rush” a review of U.K. law on deductibility of interest because existing rules already limit deductibility, the Chartered Institute of Taxation said …

The proposed restrictions are likely to have “significant adverse consequences” for heavily geared infrastructure and energy projects whose viability is often reliant on tax relief for interest, said Eloise Walker, partner at Pinsent Masons LLP, in a client briefing … Continue reading

New UK chancellor stresses commitment to reduce corporate tax rate

The UK economy is well placed to respond to the “shock” of last month’s EU referendum decision, newly appointed chancellor of the exchequer Philip Hammond told members of Parliament, saying that the government is committed to ensuring that the UK has a competitive corporate tax system that encourages innovation and business investment.

“We have already announced a reduction in corporation tax to 17 percent – the lowest rate in the G20 – and we are reducing the [property tax] business rates burden by £6.7 billion,” Hammond said July 19. He made no reference to his predecessor George Osborne’s aim, reported in the Financial Times shortly after the Brexit vote, to set a long-term target of less than 15 percent for the corporate rate.

Read more: My news story for Tax Notes, 22 July (paywall) published by Tax Analysts.

UK tax practitioners question 15% corporation tax target

After Chancellor of the Exchequer George Osborne said that he wants to set a target rate of less than 15 percent, tax practitioners suggested that further reductions in the U.K.’s corporation tax rate are not a top priority for businesses and may not have the desired effect.

Osborne is planning to “slash corporation tax” in order to woo businesses deterred from investing in a post-Brexit Britain, the Financial Times said in a July 3 report, noting that the move could alienate voters.

The Confederation of British Industry welcomed the announcement. “The chancellor is right to be considering moves that support economic growth and send out the signal that the U.K. is open for business at this critical time,” said CBI chief economist Rain Newton-Smith.

Read more: My news story for Tax Notes, 6 July (paywall) published by Tax Analysts. Stephanie Johnston contributed to this story.

Does the UK need even more corporation tax cuts?

George Osborne has told the Financial Times that he wants to set the lowest corporation tax rate of any major economy, announcing “a target of 15%”. The current rate is 20%. The paper reported that:

[Osborne] said Britain should “get on with it” to prove to investors that the country was still “open for business”.

The FT added that before the EU referendum the chancellor had “threatened to make £30bn of tax rises or spending cuts” in a post-Brexit emergency Budget:

He is now striking a more cautious note, awaiting official forecasts before announcing any new measures in the Autumn Statement.

The FT also noted that the move could alienate some voters, and Labour’s shadow chancellor John McDonnell has tabled an urgent question for today, 4 July, on the corporation tax proposal. Continue reading

UK lawmakers approve corporation tax cut

The UK’s low corporation tax rate attracts jobs and investment, and it would be a grave mistake to cancel a further cut to 17 percent planned for 2020, Financial Secretary to the Treasury David Gauke warned members of Parliament before they approved the cut by a vote of 308 to 255.

A Committee of the Whole House completed its consideration of the finance bill June 28 after several hours of debate. MPs defeated by just 22 votes an amendment implementing public country-by-country reporting, and defeated by 37 votes a new clause on tax transparency moved by Margaret Hodge, Labour MP and former chair of the House of Commons Public Accounts Committee.

Read more: My news story for Tax Notes, 30 June (paywall) published by Tax Analysts.

Public country by country reporting measure defeated by narrow margin in UK Parliament

Transparency advocates expressed optimism in the face of defeat after members of the U.K. Parliament defeated by just 22 votes a Finance Bill amendment calling for public country-by-country reporting of large multinationals’ profits and taxes.

The amendment, moved by Labour MP Caroline Flint and backed by MPs from all of the main parties and by tax advocacy groups, was defeated June 28 by a vote of 295 to 273. “A great result,” Flint tweeted.

“We are very much encouraged by today’s debate. Although the defeat is disappointing, the margin was very narrow,” Alex Cobham, director of research at the Tax Justice Network, told Tax Analysts.

Read more: My news story for Tax Notes, 29 June (paywall) published by Tax Analysts.

BEPS implementation is the hard part, tax experts tell MPs

Tax experts have told members of Parliament on the UK’s Treasury Committee that implementation of the actions recommended in the OECD’s base erosion and profit-shifting project faces some difficult challenges and will depend on maintaining an international consensus.

Asked about calls for greater transparency regarding multinationals’ tax, they argued that public country-by-country (CbC) reporting would not necessarily help people decide whether a company such as Google is paying the right amount of tax.

Read more: My news story for Tax Notes, 15 June (paywall) published by Tax Analysts.