Leading tax professionals have expressed surprise at numbers outlined in the pre-Budget report on taxing foreign profits.

The Treasury estimates taxes on foreign profits to generate £75m for the Exchequer over 2008/09 and by 2012, expect it to cost £275m - not withstanding other measures which could impact the numbers, such as the worldwide debt cap.

Deloitte tax partner Bill Dodwell said he failed to see how the Treasury calculated the forecast figures, despite being satisfied with seeing foreign profits addressed by chancellor Alistair Darling.

'It's a pretty good announcement. I'm not sure it's going to stop someone emigrating who was keen to do so but those who were undecided might now stay and stake a case for what they would like to see,' he said.

In the short term, the Treasury is expecting to generate revenue out of foreign profits via companies repatriating cash back into the UK, and there may be some initial interest disallowance.

Dodwell said he is uncertain about the Treasury's justification of the figures and said there is no explanation for the -£275m figure provided for 2012.

'We don't understand where they've got that number from. I would've expected that to be nil or flat.

'Why they think all of a sudden they're given away this gigantic amount of money is very implausible. There's nothing I can see in any of the documents that support their reasoning,' he said.

According to Jonathan Hornby, senior director of corporate tax, Alvarez and Marsal Taxand is also surprised by the forecast given the Treasury were originally estimating costs to the Exchequer to be £600m - £800m per annum.

'Most commentators didn't understand where those calculations came from in the first place. The Treasury never made that information available. This is just continuing the trend of detaching their numbers to policy decisions,' he said.

Hornby questioned whether the estimated provided in the report will be netted against the increased revenue that the Treasury expects to generate from the worldwide debt cap.

Further clarity in the form of draft clauses for 2009 is due within the next week.

Further Reading:

What to expect from the pre Budget report

Advisers await foreign profits plans in PBR