Tax inversion – what could it mean for the SMEs in the UK?
By: Simon Watson Date: 16 October 2015
The US is experiencing a growing tax-driven exodus as Corporate America continues to merge with or buy foreign companies so as to shift their domicile abroad. Despite President Obama historically stating that he plans to get tough on US companies that avoid tax through “inversions”, US companies continue to look to places where the taxman is a bit kinder and whose grasp is not as long.
Some high profiles names, such as global drinks brand, Coca Cola Enterprises, are considering moving their domicile to the UK after mergers with non US firms. The lure of a corporate tax rate of 20% (and reducing to 18% in 2020) is making the UK an attractive domicile for global businesses escaping more onerous tax rates (US companies can experience tax rates of up to 39% of foreign earnings brought back into the US).
Clearly, the favourable UK corporate tax rates makes the UK a desirable destination for global businesses and consequently established UK companies could become a far more attractive target for global acquirers. Whilst this is starting to happen at the large end of the corporate spectrum it may not be long before this filters down to the SME market.
Could tax inversion be the catalyst for putting UK SMEs on the radar of global corporate consolidators?