Government tax reforms will cripple British consultants competing for overseas business, according to Colin Adams (left), executive director of the British Consultants Bureau. The BCB has launched a blistering attack on proposals to withdraw the Foreign Earnings Deduction (FED), which exempts expatriate workers from UK income tax provided they are out of the country for a qualifying period of more than one year.
The so-called “Spice Girls” tax has been promoted as a clampdown on top earners who stay away from the UK with the sole intention of avoiding tax. But, says Adams, it will also hit consultants and engineers who work on long-term foreign assignments, and makes a mockery of government claims to be promoting British expertise abroad.
“The government has said the exemption is unjustified and being exploited by a small minority,” said Adams. “It appears they cannot see the implications of the ‘coat-tails effect’ of British expertise creating the right environment for future British exporters.”
In a letter to the Chancellor, Gordon Brown, Adams says the proposals are already beginning to bite, with one consultancy firm reducing the UK element on a project from 60 to 15. He adds: “The loss of FED … has caused a great deal of concern amongst our membership, many of whom were already seeing their competitiveness eroded through tax concessions enjoyed by consultants from EU partner countries and latterly by the high pound.”
Adams said: “The Dutch, for example, can go on a two-week ‘fishing expedition’ and get a tax credit.”
The BCB campaign has been taken up by Liberal Democrat and Conservative MPs, and Adams hopes the Finance Bill can be amended at the committee stage to restore FED for consultants.
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