UK tax regime attracts business takeovers from abroad

Further hostile takeover attempts, similar to that of AstraZeneca attempted by US pharmaceutical Pfizer earlier in the year, are likely to take place as foreign businesses seek to take advantage of the UK’s attractive corporate tax regime. The UK’s headline rate will be 20% from next April, compared with 35% in the US.

Meanwhile, the government has sought to increase the country’s attractiveness with tax incentives such as the Patent Box – a 10% tax regime for profits from UK and other European patents – and Research and Development tax credits.

Baker Tilly tax partner, George Bull, said:

“Like it or not, UK governments over the last decade have constructed a tax system which, although it may not cause the acquisition of British crown jewels by overseas investors, certainly encourages such. Although the bid is not being driven by tax considerations, these do play an important part in the structure and timing of the deal. At a stroke, Pfizer can use profits accumulated outside the USA – and not yet taxed in the USA – to acquire AstraZeneca and by reorganising under a new UK company, can permanently avoid high US taxes on such profits.”

Shareholders in UK based companies like AstraZeneca, might see the short-term attractiveness of profit to be made from a successful acquisition strategy from overseas. However concern for the future continuity of dividends, profitability and indeed the very survival of any UK bit sucked into a larger US corporation, could be very persuasive that the long term investment future of the UK business is not very attractive.

If shareholders are in for medium to long term returns on investments, they might also look with some scepticism at any UK Government assurances and guarantees around acquisitions from abroad, that stand for less than five years. Should we in the UK be concerned that such acquisitions might not be about growing a business portfolio but more about removing a successful competitor from the international marketplace?

Let’s start a conversation 

    Subscribe me for updates and news from In Accountancy

    Related articles

    time to pay arrangement
    Limited Companies

    Time to Pay Arrangements: A Lifeline for Owner-Managed Businesses

    Are You Struggling to Meet Your Tax Obligations?

    More than 30,000 UK businesses were involved in some kind of insolvency action in 2023, which was an increase of more than 50% compared with 2021 according to an article in the Guardian earlier this year.

    And the economic outlook would suggest that despite the fact that we are no longer in recession, 2024 and 2025 will be a challenging year for UK small business.

    With this in mind we have prepared the following guide and associated video to help you understand what your options are with regards to agreeing what is known as a ‘Time to Pay’ arrangement with HMRC.

    Read More »

    Find out how we can help?

    Lectus scelerisque a donec tincidunt litora per eleifend eget ut sagittis conubia pharetra scelerisque dui ultricies duis parturient auctor adipiscing.


    Let’s start a conversation 

      Subscribe me for updates and news from In Accountancy