Tax still a major concern for big business, says KPMG

Initial results from the latest KPMG annual survey of the UK's tax competitiveness suggest that Britain is still at risk of losing some of its largest businesses because of the way in which they are taxed here.

 

Migration still very much under consideration
In a survey of 57 very large companies (over 75 percent with £1 billion + turnovers), over half had either looked at the implications of moving out of the UK or were actively considering it.  Of the 20 FTSE 100 companies surveyed, four were actively considering moving.

Chris Morgan, partner in international tax at KPMG in the UK, said:  "These initial results present extremely worrying findings as they suggest we could be looking at losing some of our largest listed companies.”

The 50 percent rate has damaged the UK's attractiveness
The new 50 percent rate on income above £150,000 due to come into effect on 6 April next year has proved very unpopular.  Over eight out of ten respondents (82 percent) said it had made the UK less attractive and would make it harder to attract senior talent to the UK.

A quarter of those saying they had considered or were actively considering leaving said that the 50 percent rate of income tax was the main reason or one of the reasons behind their views on whether their companies would remain UK resident.

PBR hopes for a business-friendly foreign profits regime
More encouragingly, the survey results suggest that there are measures the Chancellor could unveil in the pre-budget report next Wednesday that might change businesses' views - especially in the area of the taxation of foreign profits.  Two thirds of the sample said that reform of the "controlled foreign companies” regime (a key element of foreign profits taxation) was important.

Looking at specific measures within the reform of the foreign profits regime, there are already talks of a special "intellectual property” regime being introduced.  The KPMG survey suggests this would be a popular move to support innovation and enterprise.  21 percent of respondents said that they might relocate their central intellectual property holding company outside the UK - up from 6 percent last year - so a move to reverse this sentiment could be welcomed.

Additionally, the survey seemed to suggest a cautious vote of confidence in progress made so far on foreign profits: half the sample (49 percent) said that the introduction of a dividend exemption, despite being coupled with the worldwide debt cap, had made the UK more attractive from a tax perspective.

Chris Morgan concluded:  "There's a huge amount to play for on corporate tax, particularly on foreign profits.  Get it wrong and there's a risk that we could lose some of our most valuable businesses.  However, progress in areas such as the dividend exemption shows that when taxpayers and tax authorities consult effectively and listen to each others' points of view, we can reach a reasonable position.  The challenge on Wednesday will be to reassure business that there is still progress towards a good solution to reforming foreign profits taxation.”

 

-ENDS-

 

The fieldwork was conducted by Lighthouse Global on behalf of KPMG during November 2009.  The sample comprised 57 companies, 75 percent of which had turnovers in excess of £1 billion.  35 percent of the sample were FTSE100 companies, 39 percent from the FTSE250 and the remainder were subsidiaries of foreign companies.

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.