Pre-Budget Report 2009 - KPMG´s expectations on business tax

  • A special tax regime for intellectual property would be welcome
  • But restrictions to how losses can be offset against tax likely to be very unpopular with business and run counter to measures introduced in the US and Germany
  • As business is still reeling from the economic crisis, the danger is  that squeezing too soon, too hard, on tax could prolong the recession

 

With the Pre-Budget Report just over two weeks away, KPMG in the UK has published its expectations for what the Chancellor might announce in the business tax arena.  The full article is accessible here.

Sue Bonney, head of tax at KPMG Europe LLP, said:
"Anything that improves the UK's attractiveness from a tax perspective would be very welcome.  We've seen a number of businesses exit the UK in a series of high profile departures.  While corporations have shown their willingness and ability to vote with their feet, the onus is on the authorities to make the UK more competitive on tax.

"Specific measures that we would like to see are a special tax regime for intellectual property to encourage businesses operating in this field to locate here in the UK.  The most likely development in our view would be some sort of system whereby income derived from patents is ringfenced and taxed at a more favourable rate than corporate profits more generally.  In our view a wider ranging regime extending to other types of intellectual property such as brands, royalties and trademarks would be even better but a patent system would be a good start and potentially would be a great boost to the UK's tax competitiveness.

"Less welcome would be any sort of restrictions on the way in which losses can be utilized.  There is a long held principle that losses are able to be offset against taxable profits.  While the temptation to limit this may be strong from the authorities' side, this would be a radical shift in policy and very unpopular with businesses that have already suffered.  A 'sale' of losses however, might be feasible.

"Overall though, it is clear that the economy is in a deep hole and there are some unpleasant decisions ahead on both the tax and the spending side if we are to rebuild public finances.  Timing is crucial.  Squeezing business too soon may jeopardize recovery.”


Tax, 23 November 2009


Ends


For media enquiries please contact:

Margot Cowhig
Senior PR Manager, Tax and People Services
Tel: +44 207 694 4246 / +44 7920 274856
margot.cowhig@kpmg.co.uk



About KPMG:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with 11,500 partners and staff.  The UK firm recorded a turnover of €2.2 billion in the year ended September 2008. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 148 countries and have more than 113,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services.