UK tax regime 'remains attractive'

The British tax regime is still attractive to foreign investors but there are concerns that increased media and political debate over the financial services system could deter companies keen to move to the UK, according to a new report from KPMG.

Its seventh annual survey of tax competitiveness found Britain to be the most attractive country from this perspective, although competitors such as Luxembourg, Ireland and Switzerland have slightly closed the gap.

Successive governments have made major efforts to secure the UK's position as a global business hub, while the country's strong links with Europe and the US make it a popular place for new businesses to create a corporate base.

However, KPMG has warned that this good work could be undone if the ongoing dispute over taxation and financial services continues to dominate discussion about the nation's business offerings.

UK head of tax Jane McCormick said: "The dial seems to have moved on the UK's tax regime from it being an actual deterrent to business and economic activity just five short years ago when some privately listed companies were emigrating, to it now being positively attractive, especially when viewed in the context of the [country] generally."

But head of tax policy Chris Morgan warned UK policy-makers to be aware of how small changes can affect the attitude of businesses to a particular regime.

The ongoing debate over tax could have a negative impact despite the various positive changes alluded to by Ms McCormick, he explained.

Some 76 per cent of FTSE 350 respondents said the media and political debate is likely to reduce investment in the UK, with this figure rising to 88 per cent among FTSE 100 companies.

However, 80 per cent of executives in foreign-owned subsidiaries felt the discussion had no effect on them, suggesting that this could be more of a domestic, parochial issue.

Businesses also need to play a part in the ongoing debate by ensuring they are as transparent as possible, concluded KPMG.