UK Election Brings Welcome Delay In Finance Bill, Say Accountants

by Jason Gorringe, Tax-News.com, London

07 April 2005

Tax professionals have expressed relief over the government’s decision to delay some crucial elements of the latest finance bill until after May’s general election, which has given more time for controversial tax issues contained in the proposed legislation to be debated, the Financial Times has reported.

Accountants have expressed concern over many aspects of the new bill, particularly new provisions on double taxation which attempt to address tax avoidance on international transactions.

Chris Morgan, a partner at accounting firm KPMG, was quoted by the paper as observing that the measures concerning firms with foreign dividends which have been granted overseas tax deductions are drafted so widely that they will affect “purely commercial arrangements where there is no tax avoidance” and ultimately catch “even the most straightforward transactions.”

Morgan warned that the new rules, which would tax these dividends fully without an underlying tax credit, may breach EU law on free movement of capital.

The tax industry also welcomed the government’s decision to delay proposals on international tax arbitrage until after the election, to be held on May 5. These measures will seek to restrict firms’ ability to gain a tax advantage by exploiting differences between two tax systems.

"We now have time to make sure that the bill does not do any more collateral damage than it has to," noted John Whiting, tax partner at PricewaterhouseCoopers according to the FT.

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