UK Unveils Corporate Tax Reform

by Jason Gorringe, Tax-News.com, London

01 December 2010

UK Chancellor George Osborne has announced details of the government's Corporate Tax Reform Program.

The Program consists of a number of essential reforms designed to improve the UK’s tax competitiveness. Measures include the introduction of new Controlled Foreign Company (CFC) rules and a commitment to introduce a 'Patent Box.'

The government makes clear its view that the changes signal an incentive for businesses to invest in the UK. The Treasury said: “That is why the June Budget announced the reduction of Corporation Tax for large and small businesses with a cut in the main rate from 28% to 24% over the next four years and a reduction in the small profits rate from 21% to 20% from April 2011.”

But the Treasury acknowledged that the debate is not just about rates. The department said that the newly published document ‘Corporate Tax Reform: delivering a more competitive system’ sets out to “provide certainty to business over the government’s plans.”

The reforms will: address corporation tax through a Corporate Tax Road Map; reconfigure the UK’s “outdated” Controlled Foreign Company (CFC) rules; introduce a 'Patent Box' in April 2013 with a lower 10% corporation tax on profits from patents; and, for foreign branches of UK companies, an opt-in for exemption for profits earned, meaning that such companies will no longer be subject to UK corporation tax on their foreign branch profits.

The Exchequer Secretary to the Treasury, David Gauke MP said:

“In recent years, too many businesses have left the UK amid concerns over tax competitiveness. It’s time to reverse this trend. Our tax system was once viewed as an asset. And it needs to be an asset again."

“That is why the government is prioritizing corporate tax reform. Responding to the concerns of business, the UK is headed for a more competitive, simpler, and more stable tax system in the future, creating the right conditions for investment”

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