Ministerial statement on DTR rules (extract from column by Adrian Rudd of PricewaterhouseCoopers, Tax Adviser’s representative on the Technical Committee, published in the May 2001 issue of Tax Adviser). Ministerial statements 2: Double Tax Relief rules
Lord McIntosh of Haringey wrote to Lord Northbrook on 6 September 2000 as follows:
‘In the course of the Finance Bill debate on 28 July you asked a question about the new double taxation relief rules. You enquired how much worse off than before companies with offshore pooling and subsidiaries in, say, New York or Japan will be. I said in reply that if a UK company holds subsidiaries in New York and/or Japan directly from the UK, the current position is that relief for foreign tax cannot exceed 30 per cent, which is the UK tax payable on a dividend. It will be possible in future for companies to have relief for this foreign tax of up to 45 per cent. I promised to write further.
‘I can confirm that what I said in the debate is correct.
‘If companies hold subsidiaries in New York or Japan through an offshore mixer company, rather than directly from the UK, it may not be possible to obtain relief for foreign tax that is paid at a rate in excess of 45%. However, whether this is the case in practice depends on the actual amount of foreign tax that is paid and the level of the subsidiaries’ distributable profits. Less foreign tax may be paid than the nominal, headline rates that have been quoted would suggest.
‘I should add that relief for foreign tax up to 45% will be available in many more ways than ever before. It will be relievable against the UK tax payable on different dividends from different companies; it can be carried backwards three years or forwards indefinitely; and it will be possible to surrender the tax for use by another company in the same group. These features of the new system are among the most flexible of any country in the world.’
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May 2001 by