Taxation of foreign profits
Following an announcement in the pre-budget report, HMRC have published draft legislation along with detailed guidance and notes in respect of the taxation of foreign profits. The new rules will be included in the 2009 Finance Bill. HMRC are inviting comments on the draft legislation before 3 March 2009 and it is expected that there may be changes before the final legislation is published.
The draft covers the following main areas:
– Taxation of foreign dividends
– Worldwide debt cap
– Extension of loan relationships unallowable purpose rule
– International movement of capital
– Controlled Foreign companies changes
This initial announcement from HMRC sets the stage for a major change in the way that the UK levies taxes on profits arising overseas. At this stage it is unclear as to which businesses will benefit and which will suffer increased taxes. We will provide further updates as more information becomes available.