Q.HOW LONG BEFORE ANY CONCRETE PROPOSALS?
A.The consultation is likely to last for around six months. The Treasury then intends to bring forward permanent reforms to the CFC?regime in 2012. In the meantime the Treasury is proposing to put forward interim measures regarding the CFC regime in a Finance Bill next year.
Q.WHAT IS BEING PROPOSED BY THE GOVERNMENT?
A.The discussion paper puts forward proposals for foreign branch opt-in exemptions which it says will simplify the current tax regime. Currently UK companies are subject to corporation tax on the profits of their foreign branches, with credit given for foreign tax paid on the same profits, in order to relieve double taxation. Under the new proposals The Treasury proposes to exempt foreign branch profits in a similar way to the way in which foreign branch dividends were exempted in 2009. However the ABI has already raised concerns the transitional proposals – they will only be effective for one year – will be too complicated and drive more businesses overseas.
Q. WILL THE UK REMAIN A SAFE PLACE FOR CORPORATE ASSETS?
A.It would appear the answer is yes. Despite the move to a more territorial tax regime, the proposals do not apply to everything. So, tax deductions for debt taken out in the UK and invested offshore, in a foreign branch, will not be reformed. Currently, a company can claim a tax deduction in the UK for the interest paid on debt but the UK receives no taxable return on that investment.