 Chancellor gives advance notice of dividend exemption to keep multinational business in Britain
24 November 2008: The Chancellor’s decision to abolish tax on the foreign dividends of big business is a welcome move, says PKF Accountants & business advisers.
Following a consultation process on the taxation of companies’ foreign profits, the Chancellor announced in his Pre-Budget Report today that a tax exemption will be introduced with effect from 1 April 2009 for overseas dividends received by medium and large UK companies in certain circumstances. The exemption is likely to apply irrespective of the size of the holding.
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 | Phlilip Howell, Tax Director at PKF said, “Over the last year, a number of large companies have made the decision to move their headquarters outside of Britain in order to save tax while many more were talking to their advisers about making the move. At the same time, these companies have been calling for the abolition of the tax. The move today is great news for those businesses thinking of leaving and for the economy as a whole.” |
A targeted anti-avoidance rule will deny the benefit of the exemption if used for tax avoidance. For corporate group borrowing, there will also be a restriction on the amount of deductible interest by reference to the group’s worldwide net consolidated finance costs. The dividend exemption is also likely to be accompanied by significant changes to the controlled foreign companies’ rules and consultation on this aspect will continue into 2009.
Philip continued, “With the current exchange rate favourable for bringing money into the UK, this move is likely to encourage many multinational companies to bring profits back into the UK which, in turn, could trigger significant benefits for the UK economy as a whole. While this change does carry significant tax costs, in the long term, it may come to be seen as one of the shrewdest measures announced in this Pre-Budget Report.”
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For further information, or to speak to a tax expert, please contact:
Jane Murray, PR Executive, 020 7065 0135, jane.murray@uk.pkf.com
For general enquiries please contact our switchboard on 0207 065 0000
Notes to Editors:
- PKF is a leading firm of accountants and business advisers with more than 1,800 partners and staff operating in 23 offices in the UK mainland firm, a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk.
- PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Guernsey) Limited is incorporated in Guernsey.
- PKF (UK) LLP is a member of PKF International which is an association of legally independent firms with more than 14,650 people operating in 119 countries around the world.
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