More hostile takeovers ‘likely’ as UK tax regime attracts businesses

by Calum Fuller

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12 May 2014

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FURTHER HOSITLE TAKEOVER ATTEMPTS similar to that of AstraZeneca by US pharmaceutical Pfizer are likely to take place as foreign businesses seek to take advantage of the UK's attractive corporate tax regime.

The UK's headline rate will be 20% from next April, compared with 35% in the US. Meanwhile, the government has sought to increase the country's attractiveness with tax incentives such as the Patent Box - a 10% tax regime for profits from UK and other European patents - and R&D tax credits.

Baker Tilly tax partner George Bull said: "Like it or not, UK governments over the last decade have constructed a tax system which, although it may not cause the acquisition of British crown jewels by overseas investors, certainly encourages it.

"Although the bid is not being driven by tax considerations, these do play an important part in the structure and timing of the deal. At a stroke, Pfizer can use profits accumulated outside the USA - and not yet taxed in the USA - to acquire AstraZeneca and by reorganising under a new UK holding company, can permanently avoid high US taxes on such profits."

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