News

July 2003

UK Seeks Corporate Views on R&D Tax Credit
London

The UK Government is inviting companies to submit their views on the definition of R&D, for the purposes of the R&D tax credit scheme that it introduced for small and medium sized businesses in 2000 and subsequently extended to large companies.

This is in response to corporate concerns that this scheme’s definition of R&D is not adequate and limits their ability to take advantage of it. Specifically, the Government is seeking views on the current definition of ‘consumable stores’ (items stored then used in the research process); how ‘advanced software’ is defined; and how third parties (subcontractors, universities, etc.,) can avail themselves of tax credits.

Those wishing to contribute comments to the paper, Defining Innovation: a consultation on the definition of R&D for tax purposes should respond by October 10.

BritishAmerican Business Action
BritishAmerican Business Comments on Potential Changes to Non-Domicile Rules
A report in the Financial Times (July 22) has claimed that the UK Treasury plans to change rules that permit wealthy individuals who are resident in the UK but claim their domicile is overseas to pay tax on their worldwide income and capital gains only if they bring the money into the UK. It is estimated that £1.5 billion could be raised through reform of these rules.

The impact changes would have on expatriation could be profound as it could discourage wealthy individuals from doing business in the UK. The FT sought comment from BritishAmerican Business on the potential impact to transatlantic business and through the Tax Forum, we stated that, “foreign domiciliary rules can work as an incentive to encourage employers to send highly compensated employees to work for the benefit of UK Plc.”

Jobs Creation Bill Introduced
Washington
The American Jobs Creation Act of 2003, unveiled by the House Ways and Means Committee on July 25, places restrictions on companies that reincorporate abroad for tax reasons by closing tax loopholes.

The bill would also repeal the Extraterritorial Income Act (ETI), the replacement regime for the Foreign Sales Corporation (both ruled illegal by the WTO), by introducing international tax measures to provide relief for income repatriated into the US by US corporations doing business overseas.

Whilst sponsored by House Committee Chairman, Bill Thomas, the bill – and its companion Senate bill sponsored by Senator Orrin Hatch (R-UT) - face a challenge from another proposal sponsored by a bi-partisan group of Representatives who argue that the Thomas Bill will be expensive and will not gain enough bi-partisan support.

EU Constitution to be Debated in European Parliament
Brussels
On September 3, Chairman of the European Constitutional Convention, Valerie Giscard d’Estaing will make a presentation to the European Parliament on the draft text of the European Constitution that he unveiled in June. Members will then debate the proposed document.

Amongst draft proposals contained within the document are proposals for a permanent EU President, a EU Foreign Minister, a common and joint foreign policy, and a legally binding Charter of Rights.

The final text of the constitution will not be delivered until after an intergovernmental conference convenes in October with officials from each of the current 15 EU member states and the 10 accession countries. The text must then be ratified by each country in a process stipulated by national law. Some countries, like the UK, allow legislatures to ratify treaties, while others, like Ireland, require a national referendum.

Upcoming BritishAmerican Business Policy Events

● 26 September, breakfast, “The World at Risk”, with Ambassador Frank Wisner, Vice-Chairman External Affairs, AIG

● 23 October, evening event with Robert Hormats, Vice-Chairman, Goldman Sachs

Please contact: ukevents@BritishAmerican Businessnc.org