George Osborne has accounted a new 8% corporation tax rate for the largest companies in the UK.
I can’t explain it better than the Guardian did:
Multinational companies will get an effective corporation tax rate of 8% for their offshore financing operations under new rules designed to stem the flow of companies leaving the UK for tax reasons.
Tax advisers warned that, despite the changes, companies would continue to leave the UK for a better tax rate. Multinationals including Shire, a pharmaceuticals group, the advertising giant WPP and the building products group Wolseley have moved offshore to be outside the UK's rules.
The government outlined plans today to overhaul the tax treatment of multinationals' complex offshore operations. The rules restrict multinationals from moving assets offshore to avoid tax.
Companies typically like to put finance functions offshore to escape the UK's 28% corporation tax. Offshore financing subsidiaries can lend to the UK group, enabling the company to offset its interest on the debt against UK profits, thus escaping tax on the loan interest in the offshore subsidiary.
The Treasury said that in future, rather than ignoring the structure and deeming the offshore income to be UK income, it would treat only a third of it as UK income. When the UK corporate tax rate hits 24%, that would mean an effective rate of just 8%.
So we’re all in this together are we?
Unless you’re a big business wanting to use a tax haven that is.
When you can have an 8% tax rate.
Words fail me, again, not least because of the abuse that this will unleash – which Osborne could never comprehend if I spent the next year explaining it to him.