TaxPersonal TaxBudget 2000: Double tax changes to hit multinationals

Budget 2000: Double tax changes to hit multinationals

Companies which earn income overseas may find themselves paying more tax and facing increased administration costs as a result of changes to double taxation relief.

The government intends to cap the rate of underlying tax paid on repatriated profits at 30% – removing at a stroke the tax benefits gained from higher relief rates for some countries.

The reform will essentially end the use of so called ‘Dutch mixers’ which allow multinationals to demonstrate they had already paid tax equivalent to UK rates. As a result they incur no extra liabilities to the Inland Revenue.

Ian Stewart, tax partner at KPMG, said: ‘The proposed changes to double tax relief for UK multinationals is likely to lead to increased overall tax being paid by these companies.

‘Rather than the administration savings claimed by the Revenue, managing dividend flows from mixers will prove a real headache.

‘This measure is significantly less generous than the US regime for foreign tax credits and does nothing to encourage the use of the UK as holding company location. The Revenue should reconsider this and allow full onshore mixing.’

The reform, described as ‘cynical’ by one international tax specialist, will come into effect from 1 April, and is expected to raise an extra £100m a year for the Revenue.

Stephen Barrett, head of tax consulting at Ernst & Young, said: ‘It’s ariad on multi nationals.’It will increase the tax burden and the administrative burden.’

Was the the Budget good for your business? Enter our online poll and win champagne

Read our extensive Budget news coverage

Budget reactions from our panel of experts

Budget overview – the main points

Related Articles

HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

2w Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

4m Alia Shoaib, Reporter
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

4m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

5m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

5m Alia Shoaib, Reporter
HMRC tax evasion assistance requests double in five years

Corporate Tax HMRC tax evasion assistance requests double in five years

5m Emma Smith, Managing Editor