UK introduces 'Google Tax'

The UK introduces a number of new tax measures on the 1st of April, foremost of which is the new 'Google Tax' rtargetting multinationals operating within the UK while diverting profits overseas

The Budgetary measure has been introduced today and it will target any company with operations in the UK which artificially diverts profits to another country.

Under this new tax, these companies will be liable to pay the Diverted Profits Tax (DPT). The tax follows criticism of multi-national companies like Google, Starbucks, Amazon and Apple.

Some of those companies are subsequently being investigated by the European Commission for their failure to pay tax in the countries where they operate.

The tax will be charged at 25% of profits, and is expected to make £25m for the Treasury this financial year, rising to £355m by 2020.

In his final Budget before the election, George Osborne had said firms that aid tax evasion will also face new penalties and criminal prosecutions.

“The so-called "Google Tax" is designed to discourage large companies diverting profits out of the UK to avoid tax,” he explained.

"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 tax also comes after last revelations that HSBC had colluded with clients of its private bank to evade tax over many years.

Osborne said he would also change the corporation tax rules to prevent contrived loss arrangements, and added that he would also be closing tax loopholes that enabled businesses to take account of foreign branches when reclaiming VAT on their overheads.

Osborne said the new tax measures he was introducing were expected to raise £3.1bn over the next five years. He added he was also raising the bank levy to 0.21%, which he said would raise £900m.

In 2013, it was revealed that Starbucks paid nothing in corporation tax between 2009 and 2012, despite sales of £400m in 2011, and had only paid £8.56m in corporation tax since it began trading in the UK in 1998.

Starbucks maintained it had made a loss in those years when it paid no corporation tax.

Under the new tax regime, companies with an annual turnover of £10m will have to tell HM Revenue & Customs (HMRC) if they think their company structure could make them liable for diverted profit tax.

Once HMRC assesses the structures, and decides how much profit was diverted from the UK, multinationals will have only 30 days to object to the 25% tax.

The European Commission has also been investigating the corporation tax arrangements of several European Union (EU) member states to determine whether those tax arrangements amounted to state aid.

Other tax changes coming in today include one that will result in cheaper flights for thousands of people who travel over 4,000 miles, but more duty for those flying between 2,000 and 4,000 miles.

Other changes, involving tax rates, personal allowances, National Insurance (NI) contributions and pensions will come into effect at the start of the next tax year, on Easter Monday.