UK and International Tax news
Manufactured Overseas Dividends And Anti Avoidance
Tuesday 27th September 2011
HMT has recently announced that it is introducing new legislation, effective from 15 September 2011, to block a specific tax avoidance scheme involving manufactured overseas dividends (MODs).
According to HMT, 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.
The new legislation will clarify 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 on 15 September 2011 will put beyond doubt that no set-off or repayment of income tax can be made in such cases.
In addition to the new legislation, the Government is to conduct a wider review of the tax rules on MODs, after the 2012 Budget, 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.
If you would like further information on the new legislation, please contact Keith Rushen on 0207 486 2378.Contact Us