The latest UK taxation rules make it more
favourable to have a UK-based overseas leasing company, according
to a financial services tax expert.
Speaking at the KPMG Leasing and Asset Finance
Forum in London, Michael Kearney, a tax manager at the professional
services firm, said the controlled foreign company (CFC) rules
included in the Finance Bill 2012 will remove a disincentive in the
current system.
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CFC rules are designed to stop UK companies
artificially diverting profits from the UK into lower-tax
jurisdictions through an overseas company by broadly treating the
profits of that overseas company as arising in the UK-resident.
The current CFC regime tends to catch all
overseas leasing companies resident in low tax jurisdictions,
Kearney told Leasing Life, regardless of whether the
overseas firm was established in another jurisdiction for genuine
commercial reasons.
This has generally meant the UK has not been
used as a holding location for global leasing businesses.
The new regime, however, which will come in to
force from January 2013 after the Bill becomes an Act later this
month, is more focused on actual diversion of UK profits and as
such should not catch those leasing companies properly established
and managed with an appropriate level of capital in lower-tax
jurisdictions, said Kearney.
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By GlobalDataKearney added: “Previously, under the old
rules, if you are an overseas leasing company in a lower-tax
jurisdiction then it would invariably be caught by the CFC rules
and profits reapportioned even if there was no tax motivation for
doing that. Now the rules are more focused on the intent.”
Kearney said it was hard to say whether the
rule change would lead to more UK-based overseas lessors but added
feeback had been positive.
He said: “Previously, clients would definitely
avoid using the UK as a hold company for overseas leasing but that
disincentive isn’t there anymore.
“We haven’t seen anything concrete yet as the
rules don’t apply until next year but, whereas before you wouldn’t
do it, now it is something people will consider.
“The feedback I have had from the leasing
community is that this has been welcomed and should make the UK a
more attractive holding location for a global leasing
business.”
