Under the proposals, British firms will no longer be taxed by the British government on dividends paid to them by foreign subsidiaries.

However, only subsidiaries which carry out activities with real economic substance can avail of the exemption.

Murphy said that the measures, which are designed to deter British multinationals from moving their operations overseas, will hit low tax regimes such as Ireland.

"I think that some of the financial operations of UK firms in Ireland will fail this test such as those companies that don't employ anyone. I think the Treasury will target those in particular, " he said.

"At the moment, it is very common for British companies to stack up their reserves in Ireland for tax reasons, which will be a much less attractive option if these proposals are passed."

According to the official text of the proposals, the British measures are designed to ensure that "multinational groups cannot artificially locate profits by, for example, divorcing them from genuine activity, or embedding them artificially in the otherwise low-value business activity of a group subsidiary".

Emer Hunt, a consultant with Matheson Ormsby Prentice and a lecturer in Revenue Law at UCD, said that it was too early to say what affect, if any, the measures will have on Ireland. She said that the Irish tax experts would be keeping an eye on the proposals but it was important to remember that the proposals wouldn't become law until 2009 at the earliest.

A spokesman for the Department of Finance said it should be noted that "the UK discussion paper states that implementation of proposed changes, if any, following on from the consultation process, would take a number of years".