Companies that shift their profits overseas in order to avoid paying tax in the UK will be subject to a 25 percent "diverted profits tax" from April 2015, George Osborne has said.
The chancellor made the announcement as part of his final Budget before the election, adding that companies that help others evade tax will be subject to penalties themselves. "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," Osborne said. The chancellor has long been criticised for implementing severe austerity measures while turning a blind eye to large corporations avoiding tax through legal loopholes.
Many companies make significant profits in the UK but are headquartered in Ireland where corporation tax is lower - allowing them to pay that rate instead of Britain's. Starbucks, Apple and Amazon have all been subject to criticism over the amount of corporation tax they pay, and are being investigated by the European commission.
Google is another target of the tax. In 2012 it was reported that the search giant had avoided paying £1 billion in corporation tax by doubling the amount of money put into a shell company in Bermuda.
Here's how the tax will work. Companies that have an annual turnover of £10 million or more must tell HMRC if they think that their company structure could make them liable for the new tax.
Once HMRC has conducted its own assessment, and decided how much profit is being diverted from the UK, the company will have 30 days to appeal to the 25 percent tax.
Osborne said that the new tax measures introduced would raise £3.1 billion over the next five years, while the Office of Budget Responsibility calculated the income (page 106) as about £1.4 billion.
This article was originally published by WIRED UK
