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Corporation tax reform: consultations

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The Treasury announced five consultations on 29 November dealing with controlled foreign companies, taxation of foreign profits, profits arising from patents and R&D tax credits:

Controlled foreign companies
Consultation on new CFC rules, to be introduced in Finance Bill 2012, introducing ‘a mainly entity based system that will operate in a targeted way by bringing within a CFC charge only the proportion of overseas profits that have been artificially diverted from the UK’. (See below re interim improvements.)

Consultation period: 29 November 2010–22 February 2011.

Further guidance: www.lexisurl.com/6AVUX

Controlled foreign companies: interim improvements
Consultation on a package of interim improvements proposed for Finance Bill 2011, designed to implement an initial set of changes consistent with the direction the Government has set for full CFC reform. The main change is ‘to exempt a CFC which carries on a range of “foreign to foreign” activities involving transactions wholly or partly with other group companies provided there is little or no risk of erosion of the UK tax base.’

Consultation period: 29 November 2010–9 February 2011.

Further guidance: www.lexisurl.com/WGr5I

Foreign branches
Consultation on an opt-in exemption from corporation tax for the profits of foreign branches of UK companies, proposed for Finance Bill 2011. Draft legislation and an explanatory note will be published shortly.

Consultation period: 29 November 2010–9 February 2011.

Further guidance: www.lexisurl.com/F4yYT

Patent Box
Consultation on a preferential tax regime for profits arising from patents, to be introduced in Finance Bill 2012.

Consultation period: 29 November 2010–22 February 2011.

Further guidance: www.lexisurl.com/bG2dm

R&D tax credits
Consultation on the support that R&D tax credits provide for innovation, and the proposals of the Dyson Review. The Government reaffirms its ‘commitment to retain and build on the existing R&D tax credit scheme’.

Consultation period: 29 November 2010–22 February 2011.

Further guidance: www.lexisurl.com/MxiYq

Open events
The Treasury will hold open events on all areas of corporate tax reform, including taxation of foreign branches, on 13 December 2010 and 11 January 2011.

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