Silicon Fen firms net tax advantage


02-08-2001

Silicon Fen companies are in line for a tax advantage over their European competitors.

A new international tax treaty has just been signed between the UK and U.S. following three years of talks.



David Nickson, regional head of international tax with Ernst & Young, says the aim of the treaty is to prevent UK-based companies, who also operate in the U.S, from paying tax twice.



A 5% withholding tax is currently taken from dividends paid by U.S. subsidiaries to their UK parent companies but that will be abolished.



'East Anglia will benefit substantially,' Mr Nickson says, 'because many locally headquartered businesses own U.S. subsidiaries.



'And we still have more favourable treatment than the rest of the EU, where withholding tax will still be suffered on U.S. dividend income.'



Mr Nickson believes multi-national companies with headquarters elsewhere in the EU will now use their UK-based subsidiaries to shelter their U.S. investments.



'Although there are anti-avoidance rules, so the tax savings can't be passed directly to the European parent, the funds saved can be invested in the company's British subsidiaries,' he said.