UK: manufactured overseas dividends - clarification of tax treatment

The Government has announced, in a recently published Ministerial Statement (here, pdf), that it will be clarifying in the next Finance Bill the corporation tax treatment of manufactured overseas dividends (MODs) received by companies. Draft legislation has been published here (pdf). This follows the disclosure of a scheme under which the recipient of a MOD claims to have received it under deduction of UK income tax, which it then seeks to set off against its corporation tax liability, or to have repaid, in circumstances where no actual UK income tax had been paid. The Government has also announced that it will issue a consultation paper after next year's budget setting out further changes to the tax rules on MODs.