June Budget – Capital distributions
The Chancellor has announced new legislation that will be of interest to 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 for all distributions made on or after 1 July 2009. 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.
This measure was previously announced at Budget 2010 and will now be legislated for in the Finance Bill to be introduced following the summer recess.