Has the U.K. become a tax haven?

U.S. firms are increasingly eyeing up London for takeover targets to benefit from low U.K. corporate tax rates.

LONDON (CNNMoney)

Why? Relatively low tax rates and a business-friendly environment.

Pfizer (PFE, Fortune 500) was the latest high-profile example; it tried to take over the British pharmaceutical firm AstraZeneca (AZN).

American and French media giants Omnicom (OMC, Fortune 500) and Publicis (PGPEF) also planned a mega-merger that would have seen the new firm domiciled in the U.K., though the deal was scuppered.

Meanwhile, the British-based InterContinental Hotels (IHG) was reportedly approached by a U.S. suitor who may have been looking to take advantage of a more favorable U.K. tax system.

British corporate tax rates are near 20%. In the U.S., rates are closer to 40% -- among the highest in the developed world.

The U.S. also levies high taxes on income that's earned abroad and brought back -- or repatriated -- to the States.

The U.K. rules are not as strict, allowing money to flow home without so many tax hassles, said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.

"The basic point is that the U.S. corporate tax system is the most onerous amongst the advanced countries," Hufbauer said. About $1.6 trillion in foreign earnings have been left overseas to avoid U.S. taxes, he added.

Related: Pfizer was banking on big tax savings in the U.K.

Companies find London attractive because of its thriving business and financial scene, a close timezone between Asia and the United States, and easy access via air travel.

Kelly Erb, a tax attorney in the Philadelphia area, also points out that comfort with language and culture make a transition to the U.K. easy.

Related: Firms warned to not leave U.S. for lower taxes

But moving to the U.K. is not as simple as opening an office in London and telling authorities your tax base has changed. The U.S. has blocked this strategy, so a corporate takeover is required.

Today, a U.S. company can only really move to a more tax-friendly nation through a process known as "inversion," where acquisition activity leads a foreign partner to own more than 20% of the stock in the merged entity, among other requirements.

This rule has spurred U.S. companies to consider big British takeover plans, but it's also created a backlash in Washington.

But various proposals in Congress to make it harder for companies haven't advanced. Meantime, companies are scrambling to make a move, said Kevin Phillips, an international tax partner at accounting firm Baker Tilly in London.

"People are trying to get in before the door gets shut," he said. "While the opportunity is there, people are taking the chance."

Related: Who pays the most income taxes?

Other companies have passed over the U.K. entirely in favor of even more tax-friendly places.

The U.S. banana producer Chiquita Brands International (CQB) has plans to go to Ireland, where corporate tax rates are about 12.5%. Chiquita agreed to take over Ireland's Fyffes, and the newly merged company will put its legal headquarters in Ireland.

Other countries that are known for low corporate taxes are Switzerland, Singapore and Luxembourg. On the other hand, most companies veer away from France because of its historically high taxes.