The government’s promised ‘Google tax’ on diverted profits poses a threat to the UK’s competitiveness and should be delayed, the Law Society said this week. The diverted profits tax, announced in the chancellor’s autumn statement, aims to tackle the problem of multinational companies routing profits into lower-tax jurisdictions.

In its response to a consultation, the Society’s tax committee said it welcomed efforts to tackle ‘what may be viewed as unacceptable tax avoidance’ but that the legislation as drafted would hit unintended targets.

These include international businesses which maintain staff and functions in non-UK jurisdictions for commercial reasons but which would be perceived to be avoiding tax. The resulting uncertainty would deter investment and ‘have negative consequences for various sectors in the UK, including investment management’.

The Society recommended delaying or at least staging the new measure’s introduction.

Committee chair Gary Richards said: ‘The current draft legislation leaves too many uncertainties. It needs to be narrowly framed so that it only affects its intended targets, avoiding a negative impact on the UK’s competitiveness and risking successful challenge under the UK’s treaty obligations.’