Overview

On 27 July 2010, HM Treasury published details of the aims and scope of the interim improvements to the UK's controlled foreign companies ("CFC") rules and the options for the introduction of a foreign branch profits exemption that were anticipated in the UK Government's Emergency Budget on 22 June. The proposals represent key planks of the UK Government's aim to create the most competitive corporate tax system in the G20.

The Treasury's discussion paper is an interesting development with potentially significant implications for the oil and gas, banking and financial sectors, and will be of wider interest to multinational groups with or considering moving towards foreign branch trading structures to secure cost efficiencies and other synergies. The proposals and options, while currently lacking in detail, are a radical departure from the UK's current corporate tax regime and will be broadly welcomed by business. The Treasury will consult with business over the summer and autumn, with a view to publishing detailed proposals and draft legislation later in 2010 and continuing consultation during the winter. The legislation will be introduced in the Finance Bill 2011.

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