Monthly Tax Idea – August 2011

New tax advantage for multinational groups

Legislative provisions will be introduced into UK tax legislation giving multi-nationals the opportunity to have some of the group’s income taxed at a rate which will fall to less than 6%.

A reform of the CFC rules will include a partial exemption for offshore finance subsidiaries that meet certain requirements.  UK parented multi-national groups will be able to set up their own overseas finance company to make loans to their non-UK operations tax efficiently. 

With suitable structuring, effectively a low rate of UK tax applies to profits earned by the offshore finance company under the proposed new rules.

Although these proposals are still being developed,  UK multinational groups should consider this new opportunity in their plans now.  This will allow the groups time to iron out difficulties and flag issues that will need addressing so that the structure is in place in time to benefit from this proposed change at the earliest opportunity and achieve maximum benefit.

The proposal could change during consultation but we would be pleased to explore this with groups at this time.