Plans seen for tax-free repatriation of profits

LONDON (Reuters) - The government is drawing up proposals that could allow UK-based multinationals to repatriate billions of pounds of foreign profits tax-free, the Financial Times reported on Wednesday.

It said the Treasury will issue a consultation paper this spring to discuss the option of bringing the British system into line with mainland Europe, which does not tax foreign dividends.

Any reform is not expected to result in an overall tax cut for companies and is likely to be accompanied by tough anti-avoidance measures, the paper said.

The Treasury had no immediate comment.

Sterling rose on the report as some investors made comparisons with the U.S. Homeland Investment Act which boosted the dollar in 2005.

The Treasury's main concern, voiced during informal discussions with business, was that the reforms might result in tax leakage by encouraging companies to borrow in Britain to invest in lower tax countries overseas, the paper said.