Tax relief measures 'will make UK less attractive'

News Article - Friday, February 09, 2007

filed under: Business

With the Treasury considering revising tax relief policies regarding controlled foreign businesses and franked incomes, taxation experts are warning that some of the government's suggestions would mark a backwards step in policy.

Among the proposals is that the UK implements allocation rules similar to those used in the US. These regulations would mean that companies must declare how its assets are extended across foreign countries, calculating interest based on the divisions, reports Accountancy Age.

The move is expected to reduce interest rates in accordance with the repatriation of dividends from overseas assets.

Tax partner at Pricewaterhouse Coopers, John Whiting, described the proposal as a "retrograde step".

"The attractiveness of the UK tax system is the flexibility of its interest relief system," he added.

Bill Dodwell, corporate tax partner at Deloitte, told the publication that allocation had been raised as one option but was later dismissed because of the "administrative nightmare".

In related news, countries which are part of the Organisation for Economic Co-operation and Development have agreed on the possible introduction of arbitration in cross-border tax disputes.

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