Shire Pharma – How does it affect you?

Following on from the media coverage of Shire Pharma’s decision to move to Ireland for tax purposes, TDN – Tax Director Network asked 40 UK tax directors for their views on how the corporate tax system in the UK affects their business.

– Over a quarter (27.5%) of respondents had been tasked to evaluate the benefits of moving their company to another international business location
– Just over half (52.5%) of respondents considered the UK corporate tax system to be reasonable

The feedback also provides some clear evidence that the UK corporate tax system is felt to be too complicated at present with respondents highlighting the need to address the following issues in order to create greater simplification.:

• More relaxed CFC rules and participation exemption on foreign profits
• Reduction of the corporation tax rate in line with Ireland
• No retrospective taxation and abolition of the schedular system
• Revision of the capital allowances and tougher penalties to discourage unfair reduction in tax and lower tax rates
Respondents put forward a number of suggested improvements in response to the question: What changes (if any) would you like to see made to the UK corporate tax system?

82.5% of respondents suggested that some kind of change to the current system could bring improvements and a competitive boost to the UK.

A third of the respondents stated that there needed to be a simplification of the current system and a greater level of certainty – “if the government wishes more corporate to stay they should consider using the stick less often and offering more carrots. Other tax regimes offer certainty – we don’t have that very much any more and other regimes try not to tax foreign profits to such an extent”.

The Foreign Profits tax system and its reform was a point of concern for a number of respondents.

Others suggested the following changes:
· “Reduction in Corporate Tax rate to below 20%”
· ”The ability to tax efficiently finance overseas operations”
· “That balance is brought to anti-avoidance so that it does not make the UK unattractive”
· “That profits earned in low tax jurisdictions can be remitted to the UK without additional cost albeit with reasonable safeguards to prevent erosion of the UK tax base”
· ”A move to a principles based system”
· “Exemption for foreign dividends “
· ”Substantial rethink of Foreign Profits proposals”
· “Significant reduction in the scope of S179, TCGA 92”
· “Scrap capital allowances and allow book depreciation; scrap capital gains (or revert to old system); foreign profits taxation a mess and the proposed changes are ill conceived; likewise loan relationships and forex rules need substantial simplification; a GAAR for intra-group transactions? ”

Some respondents suggested that a more relaxed CFC system could ease the current problems, while others felt that improved communication within the HMRC departments would bring about a better system.

If you would like to learn more about TDN – Tax Director Network and the services they provide please contact Renate Walsh at renate.walsh@winmarkeurope.com or on 020 7605 8000.