Partner Article

Tax avoidance by multi-nationals – much ado about nothing?

In this edition of Baker Tilly’s weekly round-up of the most important tax news, we look at this month’s Draft Finance Bill and find out who the real winners and losers were…

In the end it was the dog that didn’t bark in the night. Given the huge public attention given to the tax affairs of international corporations over the last year, people might have been expecting the government to block what many have seen as the loopholes which allow such companies dramatically to reduce their corporation tax bills.

But nothing so dramatic was revealed. True we had some minor tinkering round the edges but nothing substantial. This is to be welcomed. Despite almost everyone acknowledging that there are structural problems in the international corporate system, these can’t be cured by sticking plaster solutions.

A properly considered programme of reform, tested through consultation at every stage, is required. Hurried legislation is almost always bad legislation.

For domestic companies the main change will be the simplification of the rules which identify when companies are associated with each other. These have caused endless problems in the past and so reform here is welcomed.

But the biggest sigh of relief for small companies will be the postponement of any further changes to the rules on how loans to shareholders are taxed. There were some complex changes last year and the last thing we need is further changes before these have settled down.

So the government’s decision not to introduce any further changes this year is very much welcomed but there is a sting in the tail. Reform is still being considered and I suspect that this time next year we will be writing about the hideous complexity of the new system. But at least we can enjoy Christmas without having to worry about it this year…

This was posted in Bdaily's Members' News section by Baker Tilly .