US President passes Tax Reform Bill – prepare your business for change.

International tax is something that we specialise in here at James Cowper Kreston. Not only do we make sure that we are up to date on all current tax news we believe that our clients should be as well, especially if they have already expanded abroad or are considering tackling the international market for the first time.

Perhaps one of the most significant changes in international tax law occurred on 22^nd December 2017 when US President, Donald Trump, fulfilled one of his campaign promises by signing the US ‘tax reform bill’. The new reforms intend to deliver tax cuts and create new jobs for the American populace.

Who does this help?

Estimated to cost £1.456 trillion over the next ten years the bill is expected to have both winners and losers. Those most likely to benefit will be businesses and their owners however the new reforms will also affect individual tax payers.

How will this affect corporations?

The new measures are numerous and complex, a brief overview has been included below:

• A reduction in the headline rate of corporation tax to 21% from 2018 as compared to the current rate of 35%.
• 100% expensing of certain tangible assets placed into service after 27 September 2017 and until 1 January 2023 – with a view to stimulating business capital investment.
• Repeal of the corporate Alternative Minimum Tax (AMT).
• Limit on the deduction of corporate interest for certain larger corporations – generally to 30% of adjusted taxable income. This might prove challenging to the more highly geared groups.
• Changes to the use of tax losses.
• A one-time tax on accumulated foreign earnings regardless of whether such profits are actually repatriated. This will have a significant impact on the financing of international groups.
• A new base erosion anti-abuse tax (BEAT) to discourage the payments of interest, royalties or service fees to foreign entities above acceptable thresholds plus a host of other tax measures aimed at reducing multinational businesses’ incentive to shift taxable income outside the US.

How does this affect me?

The reforms do not only affect US groups but also have an impact on UK or European groups with US operations. The changes have the potential to radically change both tax-planning and international structures. Any UK groups with US operations should be analysing the changes to understand and model the potential impact on their businesses, this is where James Cowper Kreston can help. Our business advisory services, along with the skills of our award winning International Tax team will ensure that your business is prepared for any changes that may come.

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