|Printable version||E-mail this to a friend|
Government announces new legislation to block tax avoidance involving Manufactured Overseas Dividends
The Government has
today announced that it is introducing new legislation, effective
from today, to block a tax avoidance scheme involving Manufactured
Overseas Dividends (MODs). The scheme could have resulted in
companies, particularly in the financial sector, offsetting or
claiming repayment of UK income tax that had in fact never been
paid. This could have led to a significant loss of tax receipts,
had the Government not taken action.
The new legislation clarifies the corporation tax treatment of MODs. It has been drawn up to counter the newly disclosed avoidance scheme, in which the recipient of a MOD claims to have received it under deduction of UK income tax and seeks to set this off against a corporation tax liability or have it repaid, despite no UK income tax having been paid. The draft legislation, published today by HMRC, will put beyond doubt that no set-off or repayment of income tax can be made in such cases.
David Gauke, Exchequer Secretary to the Treasury, said:
“It is essential that everyone pays the right amount of tax at the right time, in order to both provide funding for public services and maintain fairness for the taxpayer, and the Government is determined to reduce tax avoidance. We have acted quickly to prevent the use of this particular scheme and we will not hesitate to close down other schemes representing a significant risk to the Exchequer as we become aware of them.”
As this is an area where there is repeated avoidance, in addition to the new legislation, the Government will conduct a wider review of the tax rules on MODs, following Budget 2012, to simplify the rules and reduce further opportunities for avoidance.
Any changes made following the consultation would not come into effect before 1 April 2013.
Notes for Editors
1. MODs are payments made under an arrangement for the transfer
of overseas shares. Where dividends are paid on the shares, one
party is required to pay to the other an amount that is
representative of those dividends.
2. The legislation will be in the 2012 Finance Bill. The draft provision, together with an Explanatory Note and Tax Information and Impact Note, can be found on the HMRC website, at www.hmrc.gov.uk/news/index.htm.
Non-media enquiries should be addressed to the Treasury
Correspondence and Enquiry Unit on
020 7270 4558 or by e-mail to email@example.com.This Press Release and other Treasury publications are available on the HM Treasury website
hm-treasury.gov.uk For the latest information from HM Treasury you can subscribe to our RSS feeds or email service.
Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.
HM Treasury Press Office (Media)
Phone: 020 7270 5238