At last some good news from the UK Government on tax for London market companies. The recent pre-budget report proposes the introduction of an exemption for foreign dividends which should increase the demand for London as a financial centre. Essentially London operations with subsidiaries in tax havens such as Bermuda will not be subject to additional UK tax on profits of such subsidiaries, thereby encouraging re-investment into London.
The proposal has been warmly welcomed by the industry. There remain, of course, other tax issues to be discussed with the Government and to this end a new high level group has been formed to provide a direct dialogue between the industry and the Chancellor. Whilst previous groups of this nature have not produced meaningful reform, the Government is still willing to talk which gives us hope of further tax concessions for the London market.
The tax regime is just one factor by which companies choose to come to London. One should add the market’s process efficiency, regulatory framework, supporting infrastructure and availability of talent. Each area has its own initiatives for improvement but the tax area had seen less movement therefore this week’s announcement must be good news.
