With McDonald’s announcing plans to say goodbye to Luxembourg and move its controversial tax structure to the UK, other big businesses that are feeling the heat of EU tax investigators might also find a welcoming bonus in Britain post-Brexit.
The Conservative government pledged to reduce the UK corporation tax from its current 20% to 15% in an effort to pacify home-grown and foreign businesses who were worried about the implications of the UK’s exit from the EU after the referendum.
And it seems that big international businesses undergoing the scrutiny of Brussels officials who are clamping down on tax evasion could also see the UK as a safe option to set up their business structures now Britain prepares to leave the EU.
With the UK’s business-friendly systems that are low on bureaucracy and high on attracting foreign investment, Britain’s tax structures are top of the list for corporations of any size who want to be tax efficient and at the same time benefit from being at the heart of a large world economy.
If McDonald’s plan goes ahead, it will see around £800m of income from its 22,000 European fast-food outlets coming through its UK holding company.
In a statement, McDonald’s said: “The change will result in the creation of a unified structure located in the UK with responsibility for the majority of royalties received. The reasons for changing the location...were sound before Brexit and remain so beyond it.”
For the past seven years, McDonald’s has used the Grand Duchy of Luxembourg - a unique low-tax environment for foreign investors - as a base to collect their franchise and royalty fees outside the US but questions were raised after it was thought a “sweetheart deal” had been made between the state and the company to reduce its tax rate.
Both McDonald’s and Luxembourg heads deny suggestions the restaurant group received special treatment from the Grand Duchy. A spokesman for McDonald’s said: ‘McDonald’s pays a significant amount of corporate taxes. From 2011 to 2015 we paid more than $2.5bn in corporate taxes in the EU, with an average tax rate approaching 27%.’
Will the UK Become a Tax Haven?
Allegations of tax avoidance have been associated with many big corporations in the past such as Starbucks, Google and Amazon. To counteract this, G20 leaders decided to introduce a radical rethink of international tax regulations in October last year.
This was backed up by Britain’s Prime Minister Theresa May at the Conservative Party Conference who criticised multinational companies as treating “tax laws as an optional extra”. She went on to say: “Change has got to come. It doesn’t matter to me who you are….if you’re a tax dodger, we’re coming after you.”
So whatever the size of your business, the message is clear. The UK is a great tax option for business. Just don’t flout the rules.
For more information on opening your business in the UK or creating a company in Luxembourg, or for more details on business tax advice, please go to our contact page or give us a call on 0044 (0) 203 445 0916 (UK) or 0033 (0) 1 53 57 49 10 (France).