David Gauke
Main Page: David Gauke (Independent - South West Hertfordshire)Department Debates - View all David Gauke's debates with the HM Treasury
(12 years, 8 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
I am today announcing that legislation will be introduced in the next Finance Bill to clarify the corporation tax treatment of manufactured overseas dividends (MODs) received by companies. The amendment will ensure that MODs cannot be used to obtain repayment or set-off of income tax that the UK Exchequer does not receive.
The clarification follows disclosure of a new avoidance scheme in 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, although no actual UK income tax has been paid.
This measure protects significant amounts of revenue. Any yield from this measure will be reflected in the OBR’s next forecast.
The Government are determined to reduce tax avoidance in order to protect the Exchequer, which provides funding for public services, and maintain fairness for the taxpayer. Accordingly, draft legislation will be published by HMRC later today, putting it beyond doubt that no set-off or repayment of income tax can be made in such cases. The legislation will have immediate effect from today.
Because of repeated avoidance in this area, the Government also intend to issue a consultation document after Budget 2012 on proposals to make wider changes to the tax rules on MODs. This review will form part of the rolling review of high risk areas of the tax code, announced in the Budget 2011 document “Tackling Tax Avoidance”. Its aim will be to reduce the need for this area of the tax code to be revisited in response to new schemes and to simplify the relevant legislation.
The Government recognise that changes to these arrangements could affect financial markets and they are committed to full consultation on any changes, which would have an appropriate lead-in period. Any changes made following the consultation would not come into effect before 1 April 2013.