BDO Stoy Hayward Bemoans Lack Of Corporate Tax Cuts In PBR

by Jason Gorringe, Tax-News.com, London

11 December 2006

Accounting firm BDO Stoy Hayward last week slammed the UK government for failing to lower the headline rate of corporate tax in the United Kingdom in Chancellor Gordon Brown's Wednesday Pre-Budget Report.

Stephen Herring, Tax Partner at BDO Stoy Hayward, commented:

“As one of a number of measures targeting tax avoidance, in the Pre-Budget statement Chancellor Gordon Brown has introduced measures that seek to counter the perceived increased scope for corporate groups to accumulate profits in companies in low tax jurisdictions within EU countries."

“This follows the recent European Court decision in favour of the taxpayer in the Cadbury-Schweppes case. The main thrust of the changes is aimed at ensuring that only profits earned in 'genuine economic activities' taking place within the EU (and Iceland and Norway) fall outside the scope of the controlled foreign companies legislation."

“The changes introduced were anticipated; the implementation of complex financing structures for European operations will need careful planning to avoid unnecessary UK taxes arising. It is a shame that the Chancellor did not take the opportunity to reduce the headline corporation tax rate, perhaps to 25%, which would itself reduce the incentive for cross-border investors to set up operations in lower tax jurisdictions outside the UK."

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