This was a Budget designed to fit the current economic straitjacket. It was fiscally neutral so that any tax raising measures and expenditure cuts are equalised out by tax cuts and expenditure increases. However, the overall thrust remains very firmly open for business, but closed to avoidance or as the Chancellor called it – a budget “for an aspiration nation”.
The most prominent corporation tax change is the proposed reduction of corporation tax to 20% with effect from April 2015 giving the UK the joint lowest rate in the G20. As could be expected, the bank levy will increase ostensibly so banks do not enjoy a reduction in their overall effective tax rate.
KPMG’s dedicated Budget 2013 website provides more detailed commentary on all aspects of the 2013 Budget.
Tax paid in the UK by multinational companies is under increasing scrutiny from the public, media and parliamentary bodies with calls for companies to pay their 'fair share' and to be more transparent around their tax affairs. David Cameron has announced that two of the three key objectives for the UK's presidency of the G8 will be tackling tax avoidance and transparency.
KPMG ran a breakfast seminar in London in February to explore these issues further. Please find further information here or contact your local KPMG tax contact.
KPMG International’s Corporate and Indirect Tax practices are pleased to announce the launch of the latest Global Corporate and Indirect Tax Survey.
Mirroring the trends seen in past years, corporate and indirect tax rates around the world are in a constant state of change as governments look to increase indirect rates to raise revenue but to decrease corporate tax rates to attract investment.
As 2012 came to a close the survey shows that the average global indirect tax increased by 0.17 percent to 15.50. Meanwhile, the average global corporate tax rate average remained almost the same with a small decline of 0.09 percent to 24.43 percent.
If you would like down load a copy of this report please click here
Remember, you can always check up-to-date global tax rates on our global tax rates site.
The new Controlled Foreign Company (CFC) regime represents a fundamental change to the UK's corporate tax system, aimed at enhancing the competitiveness of the UK as a holding location for multinational businesses. It came into force for accounting periods beginning on or after 1 January 2013 following a long and detailed period of consultation.
The new regime is more clearly targeted to situations involving the artificial diversion of profits from the UK. The rules are highly complex and present a number of compliance issues as well as some opportunities for reorganising business structures. All affected companies will have to consider these new rules, weighing up the risks and also the opportunities present.
Further information and guidance can be found on our dedicated CFC website.
The finance company exemption represents a significant opportunity for all multinationals to reduce their effective tax rate and cash taxes. This exemption provides for a partial (75%) or full exemption from UK CFC tax for profits derived from overseas group financing arrangements.
This provides an opportunity for additional tax efficiency, set out in legislation and should not add UK tax risk to your group.
Optimal funding structures which would allow groups to benefit from the Finance Company Exemption will vary depending on the specific circumstances of each group.
If you wish to discuss the new CFC regime and/or the Finance Company Exemption, please give your KPMG contact a call, or alternatively contact Alan Turner (0131 527 6727), a member of KPMG’s National CFC team.
On 11 December 2012, the Government published draft clauses for the Finance Bill 2013, including the draft legislation introducing the R&D Above The Line (ATL) Credit, which has been renamed as the R&D Expenditure Credit (R&D EC).
Following significant lobbying the R&D EC for large companies will now apply to expenditure incurred from 1 April 2013, rather than for accounting periods beginning on or after April 2013. As previously indicated, the credit rate for 2013 will be 9.1% and a higher rate will apply to Oil & Gas Companies in the Ring Fence. The current large companies’ scheme continues in parallel until April 2016; until then companies can select which regime to utilise.
While, for the majority of large companies, the new regime will be beneficial (increased EBITDA, higher profile for relief, possible cash repayment for companies with losses), those looking to reflect the benefit for accounting purposes will be required to move to a real time approach for assessing and quantifying R&D claims.
If you would like to discuss R&D matters in more detail, please speak to your KPMG contact. Alternatively, please contact our R&D specialist David McKay on 0131 451 7790.
The Finance Bill 2013 Draft Clauses, published on 11 December 2012, contain few surprises. But they do provide important developments on some key topics, including:
- The proposed legislative framework for the new General Anti-Abuse Rule (GAAR)
- The proposed changes to the tax regime which affect high value residential property worth over £2m
- The proposed changes to the taxation of gains on assets held by foreign companies closely controlled by UK participators, and transfer of assets abroad;
- The proposal to introduce a cap on some unlimited loss reliefs for individuals that can be claimed against total income (e.g. share loss relief, qualifying loan interest relief)
- The new Statutory Residence Test
- Introduction of an above the line credit for R&D
- A number of measures which are important in their market sectors (eg Creative Industries Tax Relief)
Download: Finance Bill 2013 Draft Clauses - KPMG Report (PDF 484 KB), which provides our view on the key areas with relevant links to the Draft Clauses.
The Chancellor gave this year’s Autumn Statement on Wednesday, 5 December 2012. His speech reiterated the tough road ahead for the UK economy and admitted it would take longer than originally forecast to meet debt targets. This has resulted in the austerity programme being extended until, at least, 2018. However, he unveiled several measures to stimulate growth and investment and there were some welcome surprises, including in the tax arena.
For businesses, it was disappointing to see no announcement of a tax incentive for investment in buildings, as this is an area where the UK tax system remains uncompetitive and where some action could have helped stimulate much-needed economic growth. Other announcements, though, such as the further reduction in the main corporation tax rate and the increase in Annual Investment Allowance, are positive moves.
The possibility of further changes to the pensions annual and lifetime allowances had been a subject of speculation ahead of the Autumn Statement, and individuals may be relieved that the reductions the Chancellor announced did not go as far as had been suggested. There were positives for individual taxpayers too, both in the increase in personal allowance and higher rate thresholds and in the announcement of the first increase in the Inheritance Tax nil rate band for several years.
For a more detailed insight and a selection of KPMG’s news releases connected to the measures announced in the Chancellor’s statement please visit our dedicated Autumn Statement website.
The Patent Box regime is being introduced by the Government with a view to encouraging companies to locate high-value jobs and activity associated with the development, manufacture and exploitation of patents in the UK.
The regime will apply to UK companies which derive revenues from products where the income is to some extent attributable to the patented technology (which could include, for example, equipment rental), and will also apply to royalty streams relating to exclusive licensing of patent rights. There is also a mechanism whereby a company can obtain Patent Box benefits for patents included in processes that create non-patented products.
The key benefits of the new patent box regime are as follows:
- Profits from qualifying patent interests will be taxed at 10%, delivering cash tax and effective tax rate benefits. These benefits can be in addition to R&D credits.
- The patent box rules apply from 1 April 2013, phasing in over 5 years, with 60% of the benefits available in the years starting on or after 1 April 2012, increasing to 100% in April 2017.
- Any UK company which holds interests in qualifying patents may elect into the regime.
- Even if the patented element of a product is minor, 100% of the income arising from the product may still fall into the regime.
- If your patents relate to internal processes by which your products are produced or underpin services provided, you should still qualify for the patent box regime.
Where your company does not currently have patents you may wish to consider whether you have any products, processes or technologies which could be patented. We would be happy to help you consider this together with an intellectual property expert.
The Patent Box regime is far reaching and highly beneficial; please click here for our flyer which provides further details on the regime.
We would be happy to meet with you and explain the regime in further detail, determine what it means to your company, and how we can help identify and secure tax benefits. Please contact your usual KPMG contact or a member of our Patent Box team, Gary McFetridge (0141 300 5659) or Ruth Baillie (0131 527 6734)
This survey, which assesses the impact of all business taxes (including corporate income taxes, capital taxes, sales taxes, property taxes and statutory labour costs), finds that a country's tax competitiveness is strongly related to how taxes are weighted and applied in different jurisdictions.
KPMG’s full report can be accessed here.