The UK Government aims to make the UK the most competitive corporate tax regime in the G20. We think it is succeeding. For US companies looking for a gateway into Europe, the UK offers low corporate taxes without the reputational risk associated with perceived tax havens.
By 2015 the UK’s main corporate tax rate will be 20%. Under the new patent box regime, profits derived from using certain patents will be taxed at just 10%.
For international groups the news is even better - often profits can be repatriated to the UK tax free. Dividends that UK companies receive from overseas companies are generally exempt from UK tax and companies based elsewhere in the EU can pay dividends to UK affiliate companies without having to withhold tax in their own country. The UK does have controlled foreign company rules but these were recently overhauled to make them more narrowly targeted (mainly at IP being transferred offshore) and include much wider exemptions.
When it comes to getting cash out, the UK does not impose withholding tax on dividends. Add all of this together, and it is easy to see why more and more international groups are moving their headquarters to the UK.
This is the first article in a six-part series called 'Bridging the Atlantic: Why tax makes the UK Europe’s business gateway', which focuses on UK tax issues that affect US businesses.