Insider Buiness Club: exit strategy

‘Is the UK tax environment becoming unfriendly for UK

Chas Roy-Chowdhury, head of taxation, Association of Chartered Certified

There are a range of areas where there seems to be a lot of background noise
going on in the tax area which is unhelpful to the UK.

The consultation on foreign profits hasn’t been helpful. The mood music
hasn’t helped and what we need to do is go back and redress that, show there is
stability, and show that we are trying to fight complexity. We need to
re-introduce credibility to the UK as a good location for companies to set up.

One of the reasons that businesses set up in tax havens is because there is
that certainty. They know that the tax regime there today is going to be the
same as the tax regime tomorrow and the day after. And I think that is where
developed economies, especially the UK, has been going wrong.

It needs to actually show that it’s going to be stable and it is going to be
working very hard for businesses and for individuals who want to come to the UK.

Over the last 18 months we have had a lot of rabbits pulled from the hat: the
income tax change, the abolition of the 10 pence rate that was announced last
year; then the backtracking of that this year in terms of the personal
allowance; the sudden capital gains tax announcement; the inheritance tax
changes; the non-doms’ changes. There have been all sorts of things which have
just suddenly come up.

Is it becoming an unfriendly for companies looking to invest in

Dominic Stuttaford, tax lawyer, Norton Rose LLP

There is an increasing concern both among people wanting to come into the UK
and their professional advisers that the tax system has become more uncertain
and more complex. It is not just the headline tax rate or the rate of capital
allowances, it’s also the overall climate into which they are coming.

There are questions being asked. Is this a climate where I can say to my
board that the tax rate will be firm? Is it an environment where my incoming
chief executive will be taxed in a certain way? There are a number of issues
there which could change the way in which companies and their executives are
going to be taxed in the next few years. We just want a period of calm and to
work out where we are going from and to.

Of all the companies that have gone or are looking to go, none are saying
this is purely a matter of pounds and pence. A lot of them are saying: ‘We are
looking at the current climate. We’re looking at the whole question mark around
foreign profits and other issues that we’ve seen on the political agenda over
the last few years.’ They are now saying: ‘Where do I go?’

It’s very interesting. The phrase they are using is ‘safeguarding their tax
position’. That doesn’t just mean wanting an effective tax rate lower than
competitors, although clearly they quite like that. They are also saying: ‘I
want to go somewhere in which I can say to the board going forward for the next
five years that the effective tax rate will stay like this and not be tinkered
with.’ It’s often the smaller changes that have huge knock-on effects and that
is what they want to avoid.

We also got some calls from some entirely UK operations with no international
operations asking whether they should be doing it. Actually they don’t really
need to ­ but it is right there on the agenda.

Why has the UK become uncompetitive?

John Whiting, tax partner, PwC

One major factor is that other countries have got better. They’ve seen tax
for what it is ­ a key component in a country’s competitive pitch. Countries
like the Netherlands and Ireland are obviously examples. Switzerland has set out
to have a friendly tax system that will attract and retain business.

The UK has, in many ways, led the way in this. You go back to the 1980s where
we really did start to see a good push to make the corporate tax system better.
We’ve lost a bit of ground with increased complexity, less certainty about
business taxation, etc.

My analogy is that Noah checked out the tax system on mount Ararat before
deciding that’s where he was going to ground the Ark. It has just come up lot
further up the agenda in recent months and years.

The question you have to ask is where are we going with the business tax
system? Fundamentally, are we going for an internationally competitive tax

I would like the government to say that we are going to have an
internationally competitive tax system. We are going to have a system that
attracts and retains business. We need a system where we measure it against that
yard stick and it is our driving force.

Chaired by Damian Wild

Related reading