David Jetuah, Accountancy Age, Tuesday 27 July 2010 at 11:57:00

Government unveils latest attempt to keep multinationals in the UK, whileensuring the way company funds are used in low tax jurisdictions does not erodethe UK's tax base


The coalition government has kicked off a raft of consultations in efforts tohammer out solutions to some of the UK's most contentious tax issues.

The way UK-based multinationals use income in low-tax jurisdictions has beena major sticking point for several years and the new government has made good onits promise to address the situation by starting an informal consultation aboutcontrolled foreign companies.

HM Revenue & Customs is jointly handling the consultation with theTreasury.

Senior figures from Anglo American, British American Tobacco, Xerox, IBM,Intercontinental Hotel Group, Rolls-Royce and Aviva have been drafted into aworking group operating alongside the consultation.

However, a warning was also issued by the government that any proposedchanges would not short-change the UK's tax coffers by eroding the tax base.

HMRC and the Treasury also opened a discussion document which proposed movingto a "territorial" treatment of foreign company taxation rather than basing iton ownership.

A working group including representatives from BG group, BP, HSBC Sony andStandard Chartered has been set up to discuss options and proposals in moredetail.

In total, the Exchequer Secretary to the Treasury David Gauke MP publishednine documents for discussion and consultation relating to tax, followingcommitments made in the June Budget.

In addition to the foreign branch taxation discussion and informalconsultations on CFC interim improvements, issues being discussed include PAYEreform, furnished holiday lettings, pensions tax relief, associated companyrules, disclosure of inheritance tax avoidance and modernisation of investmenttrust company rules.

Gauke said: "We want to make the tax system simpler and work better for thetaxpayer.

"By reducing burdens, making the right choices and involving taxpayers, weare

sending a very clear signal that Britain is open for business."

"I want to encourage relevant parties to provide their feedback

on the tax consultations that we have published today."

Further reading:

Vodafonesettles marathon case with taxman for 1.25bn

Battlelinesdrawn in CFC conflict