Yesterday (27 September), the Trump administration released details of a proposed new plan, which promises wide-ranging changes to the US tax system. The plan builds upon a proposal, which was first mooted by the President earlier in the year, but has now been reviewed and revised by the Republican Party, along with the White House.
More details on the reforms are highlighted in Crowe Horwath’s article Trump announces tax plan, but broadly speaking, the announcement is seen as one of the clearest movements made to date by the administration to simplify the existing complicated US tax system.
While it is worth pointing out that the framework does not come with any dates for its implementation and is subject to further amendments, the announcement does at least signal the direction of travel which the current administration is pursuing. It offers the clearest evidence that a policy of reduced taxes for both US-based companies and those international companies operating within its jurisdiction, will be sought.
Naturally then, the announcement is likely to impact on UK companies looking to, or already doing business in the US, as well as those US companies investing overseas.
What should companies do?
- For UK companies already operating in the US, it is important that they review their existing structures, which will have been designed for the existing system, and ask whether they will be fit for purpose, should these plans come to fruition. Historic tax arrangements may not be relevant or advantageous following these changes.
- For US subsidiary companies with UK-based operations, the proposals will need to be reviewed to see what, if any, impact they will have on structure.
- For companies considering doing business in the US, new advantages may potentially arise. A reduced rate of corporation tax could result in UK organisations concentrating additional resources towards the US market.
If there is uncertainty, it is vital businesses seek specialist tax advice on what these proposals will mean for their plans and existing arrangements. Firms should also keep a watchful eye on any future tax-related announcements from the White House.