21 Aug 2015 10:28 AM

The recently announced cut in the main rate of corporation tax further boosts the UK’s claim to be the best place to locate a European headquarter company.  From April 2017 the rate of tax falls to 19% and then reduces again to 18% in 2020.   This makes it one of the very lowest in Europe being substantially less than the Netherlands (at 25%) and Belgium (33%) which have been traditional European holding company locations.

Significantly though the UK has a very favourable tax regime for the receipt of dividends from subsidiaries and onward payment to shareholders.

Notably, dividends received on ordinary shares from an overseas subsidiary are exempt from corporation tax.  A UK company can pay out dividends to shareholders located anywhere in the world free of any withholding tax.  This applies to both corporate and personal shareholders.

A disposal of shares in a trading subsidiary is also free from corporation tax, providing certain ownership and trading conditions are met.

As a member of the EU and thus party to EU Parent/Subsidiary Directive and the Interest and Royalties Directive most interest and royalties can be paid and received between the UK and other EU members free of withholding tax.  In addition the UK has one of the most extensive double tax treaty networks globally allowing for reduced rates of withholding taxes on payments to many countries around the world.

This combined set of measures ensures the UK is a particular attractive gateway for businesses wanting to expand into Europe.

TAX