Brown to offer foreign subsidiary tax breaks

Gordon Brown is this week expected to announce that UK businesses with foreign subsidiaries will no longer have to pay a levy on profits returned to Britain from foreign operations.

The Times reports that Brown will make the announcement in his last Mansion House speech as chancellor. The Treasury has been consulting on this issue, and Brown's successor as chancellor is expected take further action on the matter in the pre-Budget report or the Budget.

Under the current system UK companies with operations in countries with low tax rates have to pay a 'top-up' charge on foreign earnings they repatriate to the UK.

Chris Sanger from Ernst & Young said the UK may follow the Netherlands and introduce a 'participation exemption' that would scrap any additional taxation on foreign profits.

Further reading:

Read about the ECJ cases that have influenced Brown's decision