It is the Government’s stated goal (in every tax document that they produce) that: “they are committed to making the UK an increasingly attractive place in which to invest and do business.”
Given this goal, it was therefore a surprise when a review, documented in the Daily Telegraph, of the FTSE100’s total tax cost highlighted that in 2009 the Government took 56.6% of their gross profits in taxes up from 48.6 per cent in 2008.
This got me thinking whether the Government had met its oft stated objective in recent years.
From a corporation tax perspective, it is true that the Government has put in place a number of pieces of tax legislation that aim to make the UK a better international business location. For example, the substantial shareholding exemption for capital gains on the sale of qualifying shares and the recently enacted dividend exemption.
However, these are more than offset by the complex and lengthy tax legislation brought in each year, the excessive amounts of anti-avoidance (in the most part required because the complex and lengthy tax legislation has mismatches and inconsistencies in the original drafting), the removal of business enhancing reliefs and the introduction of huge amount of uncertainty as to the direction of the UK tax system.
Moreover, when one looks in detail at the beneficial pieces of legislation, they have multiple tests and qualifying conditions that make them unfavourable and cumbersome in comparison with the various participation exemptions in other jurisdictions.
Finally, the UK’s corporate tax rate, once leading the way, has slipped back into the pack – even Germany is broadly on a par with the UK now!!!
The recent changes in personal taxation have also not gone unnoticed. The removal of the 10% rate, the non-doms legislation and forthcoming 2010 and 2011 changes:
have and will continue to contribute to the increasing overall total tax burden of UK companies.