The UK Chancellor has confirmed, in his final budget before the election, that ‘Google Tax‘ will come into effect next month, from April 1. Companies that move their profits overseas to avoid tax will be subject to a “diverted profits tax” from April.
George Osborne said firms that aid tax evasion will also face new penalties and criminal prosecutions.
The so-called “Google Tax” is designed to discourage large companies diverting profits out of the the UK to avoid tax. It follows rows over how much corporation tax some companies pay.
Mr Osborne said.
“Let the message go out: this country’s tolerance for those who will not pay their fair share of taxes has come to an end,“
The Chancellor said his deputy, chief secretary to the Treasury Danny Alexander, would be announcing new legislation on Thursday outlining new criminal offences and penalties for aiding tax evasion.
Mr Osborne said he would also change the corporation tax rules to prevent contrived loss arrangements.
He added he would also be closing tax loopholes that enabled businesses to take account of foreign branches when reclaiming VAT on their overheads.
Mr Osborne said the new tax measures he was introducing were expected to raise £3.1bn over the next five years.
He added he was also raising the bank levy to 0.21%, which he said would raise £900m.
And he said he was closing a loophole in the law that allowed the banks to offset charges for mis-selling, including payment protection insurance, and other misconduct against their corporation tax bills.
Companies such as Starbucks, Apple and Amazon, among others, have come in for significant criticism in recent years over the amount of corporation tax they pay in the UK.
They are all currently being investigated by the European Commission over their tax arrangements.
Under the new tax regime, companies with an annual turnover of £10m will have to tell HM Revenue & Customs (HMRC) if they think their company structure could make them liable for diverted profit tax.
Once HMRC has assessed the structures, and decided how much profit has been artificially diverted from the UK, multinationals will have only 30 days to object to the 25% tax.
