Budget 2010 – Capital distributions
The Chancellor has announced new legislation that will affect UK multinationals in receipt of distributions.
The new legislation will allow HMRC to revert to its previous practice whereby only distributions specifically excluded from income are treated as capital and simplify the distribution exemption regime by making it unnecessary to consider difficult boundary issues between income and capital.
The legislation will have retrospective effect although UK companies will be able to elect for the legislation not to apply retrospectively. This move corrects an anomaly that arose following the introduction of the dividend exemption.