The way in which multinationals avoid paying UK tax on profit generated by their UK operations is to use royalty structures in which UK business are required to pay a commercially acceptable royalty for the use of trade name and the brand. If there is to be a stop to profit shifting out of the UK, then these tax acceptable deductions will need to be reviewed to prevent profit flow. It will be interesting to see whether certain royalty structures will now be considered as falling with GAAR.
A crackdown on tax avoidance by multinational companies will raise about £1bn over five years, Chancellor George Osborne has said. He is imposing a 25% tax on "profits generated by multinationals from economic activity in the UK which they then artificially shift" out of the UK. Companies such as Google, Amazon and Starbucks have been accused of using such strategies to reduce tax bills. Multinational companies must pay their "fair share" of tax, Mr Osborne said. The move is likely to be part of a wider international effort to curb multinationals' tax avoidance and evasion.