US tax reform – What does this mean for UK investors?
As President Trump and The Republican Party celebrate the tax reform bill going through both Houses, here are some initial thoughts on what it could mean for UK businesses that operate in the USA.
- The main rate of federal corporate income tax reduces from 35% to 21%, meaning those companies with high US profits are likely to see a federal tax saving
- A limit on tax relief for interest on borrowings of 30% of profits. This is similar to recent changes in the UK and will only affect highly geared companies
- The top rate for federal income tax will be cut from 39.6% to 37%
- It would appear that locally recruited staff and any secondees to the US will benefit from the tax cuts in the short-term. The individual tax cuts expire in 2025
- One of the main thrusts of the changes is to encourage US companies to repatriate profits earned overseas back to the USA. The impact this will have on UK businesses is unclear; it may lead to less US investment overseas.
Whilst there are ‘winners’ and ‘losers’ under the reform bill, our initial view is that the changes are not likely to adversely affect UK businesses with operations in the USA. However, the reform bill is the most significant change in US tax law since Ronald Reagan’s presidency and the changes are complex.
In the New Year we will be analysing the changes and will give further updates on how these might affect you.