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Finance Bill 2015 paves the way for new 'Google tax'

11 Dec 2014

The Government has published draft tax legislation to implement its 2014 Budget and Autumn Statement policies, including plans to introduce a new tax on the diverted profits of large multinational enterprises, dubbed the ‘Google tax’.

Finance Bill 2015 contains a number of measures aimed at supporting UK businesses and working families, which include increasing research and development (R&D) tax credits and raising the income tax personal allowance from £10,000 to £10,600 with effect from 2015/16.

One rather more controversial measure included in the Bill, however, is the introduction of a new Diverted Profits Tax. Announced in the 2014 Autumn Statement, the new tax will target multinational enterprises with business activities in the UK who ‘enter into contrived arrangements to divert profits from the UK by avoiding a UK taxable presence and/or by other contrived arrangements between connected entities’.

The Diverted Profits Tax will be applied using a rate of 25% from 1 April 2015 and is expected to raise £1.4bn over the course of the next five years.

Commenting on the new measure, John Cridland, director-general of the Confederation of British Industry, said: ‘International tax rules are in urgent need of updating but there is already an OECD process underway to do this. It is unfortunate that the UK has decided to go it alone with a Diverted Profits Tax outside this process, which will be a real concern for global businesses.

‘The legislation will be complex to apply, and if other countries follow suit businesses will have a patchwork of uncoordinated unilateral rules to navigate, which risks undermining the whole OECD approach.’

A consultation on the draft legislation will run until 4 February 2015.