Budget 2009 – Taxation of foreign profits
Following an extensive period of consultation, the Chancellor has announced that a new foreign profits package will be introduced in the 2009 Finance Bill changing the way foreign profits are taxed.
There are four main elements to the foreign profits package:
- Most dividends and other distributions received from both UK and foreign companies will be exempt from corporation tax. This measure will apply from 1 July 2009.
- Finance costs payable by UK group members will be subject to a ‘debt cap’ which restricts UK tax deductions in accounting periods beginning on or after 1 January 2010.
- The repeal of Treasury Consent rules which are to be replaced with new reporting requirements for foreign transactions of more than £100 million on transactions on or after 1 July 2009.
- The removal of the Controlled Foreign Company (CFC) and Acceptable Distribution Policy (ADP) holding exemptions. This measure will have effect for accounting periods starting on or after 1 July 2009 (subject to a two year transitional period for ADP’s).