Foreign dividend error to be put right
4 Aug 08
In her speech announcing the third reading of the Finance Bill, the Financial Secretary Jane Kennedy MP said that because of an oversight, the rules for giving double tax relief on foreign income were not altered to reflect the reduction in the corporation tax rate
If that were uncorrected, some companies could face double taxation on some dividends during this financial year.
The problem will be addressed in next year’s Finance Bill, with provisions backdated to 1 April 2008. Meantime, HMRC will use its discretion to give the necessary relief.
HMRC has since issued a note saying that they will discuss exactly how to solve the problem with business representatives.
Meanwhile, it will work on the assumption that the mixer cap applies by reference to the rate of tax actually applying to the dividend, not the statutory rate, and will give relief accordingly.