Taxing multinationals, and the public accounts committee: is there a place for common sense?

Following the sessions of the public accounts committee with Google and the HMRC, many commentators remain uncomfortable that US multinationals with significant UK operations can legitimately claim not to be taxable in the UK.

The committee itself was clearly puzzled that evidence given to it by ‘whistleblowers’ did not fatally undermine Google’s own position. Answering criticism last week that the committee does not understand the underlying tax principles well enough, Mrs Hodge challenged tax professionals to explain in ‘common-sense’ terms why the ‘anger’ felt by members of the committee and the public was misplaced. So here goes.

The question the committee was wrestling with is how it can be possible that an organisation that conducts sales activities in the UK, with UK customers and using UK employees, is not taxable on the profits from those sales. The answer is that it is, but in a way that reflects the division of activities between the UK business and the business elsewhere…

If you are registered and logged in to the site, click on the link below to read the rest of the Allen & Overy briefing. If not, please register or sign in with your details below.

Briefings from Allen & Overy

  • ITC reaffirms its power to bar digital file transfers

    The ITC has reaffirmed its power to ban electronic transmissions from the US where those transmissions infringe an intellectual property right or are otherwise based on an unfair trade practice.

  • Changes to French takeover rules

    A new French law, the ‘Law to recapture the real economy’ (‘Loi visant à reconquérir l’économie réelle’ or ‘Loi Florange’), was made on 1 April 2014.

View more briefings from Allen & Overy

Analysis from The Lawyer

View more analysis from The Lawyer


One Bishops Square
E1 6AD

Turnover (£m): 1,189.00
No. of Lawyers: 2,304
No. of Lawyers (Asia Pacific): 357
Offices (Asia Pacific): 10