There has been a lot of controversy concerning UK corporation tax lately, with multimillion-dollar companies such as Starbucks and Google under investigation by the European Commission. In light of the recent LuxLeaks scandal, it is not difficult to see why many of these multinational companies would be under scrutiny, as the scandal revealed tax rulings that showed companies channelling their profits through Luxembourg, ultimately allowing them to have a lower tax bill.

In fact, Facebook paid only £4,327 in corporation tax last year; a year in which they reported a 34% increase in global profits in their fourth-quarter. They affirm, however, that they are compliant with the UK tax laws, and that they plan to expand with a headquarters in the UK in the next couple of years.

Since the recent chain of events involving corporate tax bills and tax evasion has come to the eye of the public, there has been an outpour of anger and confusion. However, in the case of the Facebook Corporation, they have not actually broken any laws. Therefore, we can see that the problem may not be compliance, but perhaps it is the rules and regulations of the UK tax code itself.

People from all sides of tax law, from the Taxpayers’ Alliance to Parliament’s Treasury Select Committee know that it is now vital that something be done to simplify the code and lower taxes for corporations. “There are significant loop holes in our UK Tax system. Rightly or wrongly these loopholes do exist,” said Mandeep Ubhi, Director at Morgan Reach Chartered Certified Accountants. There have been proposals to bring forward a profits tax on multinational companies, as well as new penalties for companies found guilty of tax evasion. Ultimately, the goal is to keep corporations based here in the UK and hopefully create a more competitive environment that keeps them on the right side of tax law.

Mandeep offered further remarks concerning corporation tax stating, “In the recent budget it was announced by the Government that they are trying to help UK businesses thrive through this prolonged recession. This has been done by reducing the corporation tax rate to 19% initially from 1st April 2017 and eventually the rate drops to 18% from 1st April 2020. This will be especially beneficial to small and medium-sized businesses. This makes the UK a very attractive market place for businesses, especially when you compare corporation tax rates of other countries such as the US at 40%, Japan at 33%, and Germany at 29.65%. It is hoped that dropping the corporation tax rate by 2% is seen as a significant enticing factor by overseas businesses. Only time will tell, whether this rate drop is big enough to drive more businesses to set up ‘shop’ in the UK.”