UK government and HMRC should do more to attract and retain Japanese businesses
The UK government and HMRC should take further steps to attract and retain Japanese businesses, say leading audit, tax and business advisory firm, Blick Rothenberg.
Aliona Le Khak, who has joined the firm as a director leading Global Mobility services for Japanese clients, said: “To remain competitive on the global stage, the UK needs to ensure that its tax and regulatory frameworks support, rather than deter, inward Japanese investment. Especially in light of the announcement that Japanese firms will invest up to £9bn in UK offshore wind farms and more than £9bn in UK infrastructure and financial services.”
She added: “For example, HMRC has clarified that the cost of obtaining a Certificate of Sponsorship (CoS) for visa purposes should be treated as a taxable Benefit in Kind (BIK). This is despite the fact that CoS is a regulatory requirement imposed on employers, not employees. Given that visa-related costs are already significant, and often subject to tax gross-up, this treatment further increases the financial burden on Japanese employers expanding into the UK.”
Aliona said: “Visa costs, including CoS are not taxable when assignees come to the UK for the first time, but if an assignee who is already located in the UK applies for a visa for the first time or applies for a visa extension, it is fully taxable. The government should consider whether HMRC’s position on CoS is reasonable. The definition of BIK is a non-cash benefit provided to an employee by an employer that holds a monetary value – except a CoS provides no direct benefit to the employee and arguably does not hold a monetary value.”
She added: “Similarly, there have been challenging discussions between HMRC, Japanese businesses, and tax advisers regarding the treatment of Japanese health insurance (Kenko Hoken) employer premiums. Although these contributions form an integral part of Japan’s social security system, HMRC is seeking to treat them as taxable in the UK.”
Aliona said: “This is despite the fact that expatriate assignees typically maintain private medical insurance while in the UK and do not access benefits under the Japanese system during their assignment. As such, these premiums do not relate to any tangible UK-based benefit. The government should again consider if HMRC’s position is reasonable and weigh up the short-term benefit of additional tax take verses the long-term benefits of encouraging international expansion and investment.”
She added: “In recent years, Brexit and the increasing tax burden associated with employing expatriate assignees in the UK has contributed to a noticeable decline in the expatriate workforce across the board. This trend is closely linked to overall business activity, as fewer expatriates often means reduced international business presence and, consequently, a lower contribution to the UK economy.”
Aliona said: “As a result, many multinational companies are now more inclined to redirect investment and operations to alternative locations, including nearby EU countries that offer more favourable tax regimes for expatriates and lower employment costs. These jurisdictions are increasingly perceived as more competitive and predictable environments for global mobility.”
She added: “This risks undermining the UK’s attractiveness as a destination for international business. Increased costs and uncertainty in tax treatment may prompt companies to reconsider further expansion in the UK.”
Aliona said: “I joined Blick Rothenberg after more than 14 years at KPMG. I aim to leverage the expertise I have developed within the Big Four environment while working closely with colleagues across Payroll, Social Security, Corporate Tax, Employment Tax as well as other specialist schemes. This collaborative approach helps us gain a comprehensive understanding of client issues—something that can be more challenging in larger organisations. By working together across teams, we can view the full picture and deliver timely, high-value solutions to our Japanese clients.”