26 THE KNOWLEDGE
IS THE UK TAX REGIME
STILL A TRUSTED PARTNER?
There is no doubt that in terms of reputation, the
favourable tax treaties (including withholding tax rates) in place.
UK has received some bad press this year as not
They want to be able to negotiate with the authorities to agree
being a tax stable home for business. Brian
concessions or get certainty through advance rulings on tax. They
like to see no capital or stamp duties. And, from a personal
Jackson wonders if it really deserve the headlines?
perspective, they will look for a favourable personal tax system.
Earlier in the year, large FTSE companies such as Shire
Of course, such a big decision as a headquarter location is not
Pharmaceuticals and United Business Media announced they were
purely tax driven. A business will assess other, non-tax, attributes
moving headquarters out of the UK in protest at the Government’s
such as political stability, infrastructure, access to capital markets
complex business tax regime. At the same time, the sagas around
and so on.
proposed and subsequently amended reforms to capital gains tax,
the non-doms regime and the 10p tax rate, which prompted cries
The UK has a lot going for it as a business location. It is one of the
of “u-turn” from commentators, did not help create the impression
world’s leading capital markets, with a diverse skills base, good
that the UK is a stable tax planning country of choice.
transport and infrastructure system, and a robust (if fragmented)
regulatory regime.
So given all the political change and movement back, how does
the UK compare as a destination of choice for business?
But tax is creeping up the agenda and the imperative to fix our
system has never been more urgent.
The business community has been voicing concerns about the UK
corporate tax system for some time. Evidence that we have
Source: Brian Jackson is Head of Tax at KPMG Gatwick
allowed our European competitors to steal a march on us is
www.kpmg.co.uk
undeniable. Against our EU peers, we have slipped from having the
fourth most competitive corporate tax rate in 2000 to 19th in 2008.
At 28%, the UK doesn’t have the worst corporate tax rate. In fact it’s
the lowest rate amongst the G7 countries. But these aren’t really the
competitors in terms of potential headquarter locations.
Luxembourg, Switzerland, the Netherlands and Ireland tend to be
the contenders in this context. When it comes to tax these “shops
down the road” sell it cheaper.
However, in two recent international KPMG surveys, the UK was
ranked top for VAT friendliness and the third most attractive country
for research and development tax relief regime.
It’s not that our tax system doesn’t have its attractions; the problem
seems to be that it’s too complicated and uncertain.
More businesses are now competing on a global scale and
companies cannot afford to be at a competitive disadvantage,
whether it’s on labour, raw materials, distribution or, in this case, tax.
Tax is under the same scrutiny as all these other business costs.
Whether in assessing a particular jurisdiction as a headquarter
location, or lobbying the UK government on improving the tax
system, business looks for certain attributes on tax.
They want simplicity and fairness but within that, specific areas that
are attractive are a tax-free repatriation of profits earned and taxed
overseas, a more sensible set of rules for taxing profits from low tax
jurisdictions and either no, or a low, withholding tax on dividends.
When dealing with their group territories, businesses want to see
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