This was one of eight points put forward by the English ICA in an open letter to Gordon Brown today calling for controversial changes announced in the Budget to be dropped from Friday’s finance bill.
The letter, signed by institute president Dame Sheila Masters, deals with proposals to abolish foreign tax credits where overseas dividends are routed through an offshore ‘mixer’ company, as well as the abolition of indirect tax relief for spared tax.
It also deals with proposed changes to the rules concerning controlled foreign companies.
The surprise moves were contained in post-Budget press releases and provoked sharp criticism from accountants and tax advisers culminating in an unprecedented war of words between Gordon Brown and Peter Wyman, PricewaterhouseCoopers partner and soon-to-be institute vice president.
Among the points in the institute’s letter is a plea for the UK’s competitive position to be considered.
It says: ‘We are concerned the proposed changes to double tax relief rules will make the UK an uncompetitive location for a corporate headquarters, particularly when compared to other G7 countries.
‘The UK would be the only country in the G7, which account for two thirds of world GDP, that sought to tax on a source by source basis. Specifically, it would be the only country not allowing tax paid in one foreign country to be set against UK tax on profits in another.
‘The UK and Japan put everyhing into ‘baskets’ of foreign income and set off foreign taxes on an aggregrate basis. Canada, France, Germany and (from 2001) Italy effectively exempt foreign income.
The letter ends by requesting that DTR and CFC clauses are not included in the Finance Bill, due to be published this Friday.
‘Now we are aware of the government’s thinking on these measures, the Revenue should engage in a further round of consultation. Any revisions should be introduced along with the promised further package of measures to encourage UK business,’ it concluded.
Audit threshold raised to £1m – £4.8m threshold to follow