Cautious welcome to draft tax rules for multinationals

Chris Morgan, KPMG head of international corporate tax, has described the government's draft legislaion on corporate taxation of foreign profits as 'one of the most significant changes we’ve seen in the corporate tax landscape'.

The draft legislation package includes, among others, an exemption for foreign dividends for large and medium size groups; restriction on the deductibility of interest expense claimed by UK members of a multinational group; repeal of the Treasury Consent Rules; and extension of an existing anti-avoidance rule.

'It marks a decisive shift towards a territorial tax system where the UK only taxes profits made in the UK. Such a change is essential if the UK is to have a modern, competitive tax regime,' Morgan said.

'However the key element is still missing. This is reform of the controlled foreign companies rules under which profits from overseas subsidiaries of UK-resident parents may be taxed in the UK as they arise. The CFC rules are one of the main reasons for a number of companies having migrated from the UK this year.'

Further reading:

Advisers await foreign profits plans in PBR

Foreign tax change put on hold