HM Treasury
 Printable version
|
 E-mail this to a friend
|
Paymaster General, Dawn Primarolo MP, releases discussion document on taxation of foreign profits of companies
Paymaster General, Dawn Primarolo MP, today announced the publication of a joint HM Treasury and HM Revenue and Customs discussion document on reforming the taxation of foreign profits of companies.
The document follows a commitment made in the 2007 Budget to consult on this issue in the context of maintaining the overall competitiveness of the UK.
Over the last year the Government has held informal discussions with representatives of multinational business in which there was mutual recognition that the current system for taxing foreign profits may no longer be as suitable as it once was for either business or Government.
The Government is proposing a package of structural reform, intended to modernise and create a more straightforward regime for taxing foreign profits. The aim is to achieve a balanced, broadly revenue-neutral package that meets the needs of both business and Government.
The Government will be discussing its proposals with business over the summer, and in the light of these discussions will then consider whether to bring forward more detailed proposals.
Dawn Primarolo said:
"This discussion document underlines the Government's commitment to provide the best possible environment for business, and to maintain a modern, efficient and competitive business tax regime.
I am particularly pleased to be able to propose the repeal of the Treasury Consents rules as part of a balanced package.
The discussions will build on the open and constructive dialogue we have had with business over the last year, and I look forward to that dialogue continuing over the coming months."
The discussions will be held over the summer, closing on 14 September. Contributions are invited from business and other stakeholders.
NOTES FOR EDITORS
1. During 2006 the Government discussed with representatives of multinational business the impact of the UK tax system on companies' competitiveness. One of the issues which the business representatives identified as needing reform was the tax treatment of foreign profits, particularly the taxation of foreign dividends and the UK's Controlled Foreign Companies (CFC) regime.
2. At Pre-Budget Report 2006 the Government announced it would consult in 2007 on the taxation of foreign profits. At Budget 20007 the Government said it would issue a consultation document later in the spring, which will consider in particular the taxation of foreign dividends and the CFC rules.
3. The discussion document issued today suggests the following package of reforms:
* the introduction of an exemption regime for many foreign
dividends for large and medium business;
* a simplified credit
regime for foreign dividends of small business;
* a new
Controlled Companies (CC) regime, established on an income basis
rather than the 'all-or-nothing' entity basis of the
current Controlled Foreign Companies (CFC) regime and applying, in
part, to the UK subsidiaries of UK based groups, to prevent
artificial location of profits;
* retention of the UK's
very competitive interest rules, subject only to stronger
anti-abuse provisions (which will apply generally, and not just in
the foreign profits arena); and
* repeal of the Treasury
Consents rules, which require UK companies to obtain consent from
the Treasury before certain transactions involving foreign
subsidiaries are carried out, with the introduction of an
information-reporting requirement.
* consideration, with
business, of what additional anti-abuse rules may be needed to
ensure that dividend exemption is not abused
4. The discussion document can be found on the HMT website at http://www.hm-treasury.gov.uk/consultations_and_legislation/foreign_profits/consult_foreign_profits.cfm.
5. Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk.
6. This press release and other Treasury publications and information are available on the http://www.hm-treasury.gov.uk. If you would like Treasury press releases to be sent to you automatically by e-mail you can subscribe to this service from the press release site on the website.
