A couple of items. The Corporation Tax Bill received its first reading in the House of Commons on 4 December. The Bill is the fifth produced as part of the Tax Law Rewrite project and may well contain, by the time it becomes law, more sections than the Companies Act 2006! Explanatory memoranda are available here.Not long after its defeat in Test Claimants In the FII Group Litigation v HM Revenue & Customs [2008] EWHC 2893 (Ch), in which the aspects of the UK corporate tax regime concerning dividends were found to breach Community law, HMRC has published draft clauses which will make significant changes to the taxation of companies' foreign profits. In the accompanying consultation paper, HMRC explains (paras. 5 to 7):
Currently the UK taxes overseas dividends received by UK companies and provides credit for overseas tax paid, whilst addressing double taxation domestically by exempting UK dividends. Many businesses view the tax with credit rules as administratively burdensome and disproportionate in comparison to the relatively low amount of tax they generate. It is further argued that the rules consequently hinder the UK’s competitive position.With this in mind, the central measure within the foreign profits reform package is an exemption from tax for dividends received by large and medium groups regardless of the source. The policy objective is to enhance the competitiveness of the UK by providing the widest possible exemption. Compared with other developed countries, this dividend exemption is one of the most generous as it is available regardless of the level of shareholding.
There is a fiscal risk associated with the introduction of such a wide-ranging exemption. In particular, it is likely that some groups will change their behaviour in order to take advantage of dividend exemption. For example, under dividend exemption multinational firms have more incentive to divert UK profit overseas. Therefore, in order to help manage the fiscal risk, the Government intends that dividend exemption will not be available where it is used for tax avoidance
purposes ..."
The legislation that is being created to benifit the UK in becoming a central economic power seems a little obstructed by other important, brushed aside points. There is a lack of security for our nations welfare and reduces the encouragement of growth within our state. It feels like we have given up and want the successful modern countries to take the baton and invade our financial market. I very much enjoyed the article and it brought about a variety of interesting points.
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