The Government has today announced plans to clamp down on tax avoidance by multinational companies, dubbed the 'Google Tax', and outlined other ways to help the High Street.
Chancellor of the Exchequer George Osborne was talking today at the House of Commons to provide the Autumn Statement on the state of the UK economy.
"Currently some large multinational companies divert profits abroad through complicated business structures, such as the so-called ‘double Irish’, in order to avoid paying taxes. The Government is introducing a new tax to counter this," read a statement from the HM Treasury.
This ‘diverted profits tax’ will apply to a company’s profits that have been diverted from the UK, and will apply to both UK and foreign multinational companies.
For example, if a company generates strong sales in the UK, but can avoid paying corporation tax by moving profits generated in the UK to other countries through the manipulation of the international tax rules, the UK will now be able to tax those profits at a rate of 25 per cent.
This new so-called 'Google Tax' will be introduced from April 2015.
In addition, Osborne promised that business rates will be cut and capped, with extra help given to UK High Streets.
To support small businesses in local communities, a ‘High Street discount’ for around 300,000 shops, pubs, cafes and restaurants will go up from £1,000 to £1,500, from April 2015 to March 2016.
Plus, the Small Business Rate Relief will be doubled for a further year, which Osborne says means that 380,000 of the smallest businesses will pay no rates at all.
The Government will also continue to cap the annual increase in business rates at 2 per cent from April 2015 to March 2016.
Finally, the Government will extend the 'transitional arrangements' for smaller properties that would otherwise face extortionate bill increases due to the ending of ‘transitional rate relief’.