A move by HM Treasury to tax intellectual property (IP) on UK companies with foreign subsidiaries seems set to be ditched after a backlash by businesses.

A move by HM Treasury to tax intellectual property (IP) on UK companies with foreign subsidiaries seems set to be ditched after a backlash by businesses.

Peter Maybrey, a partner with professional services firm PricewaterhouseCoopers (PwC), says: ‘As the proposals stand at the moment, any sales income that you derive anywhere in the world, which relates to IP or any sort of intangibles, will be taxed in the UK.’

The IP proposals form part of a series of initiatives put forward in July 2007 by HM Treasury in regard to tax on foreign profits. Other measures include tighter anti-income diversion rules and a lowering of the limits on tax deduction on interest payments.
‘These changes are not just a concern for big business,’ says Maybrey. ‘They affect all UK-based businesses with operations.’

The uproar from UK companies and lobby groups such as the Confederation of British Industry (CBI), notably at the compliance burden and the negative impact on companies’ bottom line, led Chancellor Alistair Darling to establish a group to evaluate the merits of the proposals.

‘I think there has been a definite move during the past three to four months. The whole attitude of HM Treasury has been much more positive. Some of the meetings we have had with treasury officials and HMRC have been much more cooperative and less confrontational.’

For CBI head honcho Richard Lambert, common sense needs to prevail. Otherwise ‘businesses are prepared to vote with their feet if they feel the UK’s tax or regulatory regime is placing them at a disadvantage’.