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The Government is to introduce legislation to clarify the treatment of distributions received by UK companies.
The proposed legislation will increase the scope of the corporation tax distribution exemption regime introduced in FA 2009.
It will enable HMRC to revert to their long-standing practice of treating certain distributions received by UK companies as income in nature. This means some distributions will not be prevented from falling within the exemption regime by virtue of being capital distributions.
Where appropriate, the new legislation will have retrospective effect, although this will be subject to an opt out. In some cases, this may reduce the amount of a company’s tax liability.
Where the Revenue becomes aware of this, the department will not take action to recover the tax that will no longer be due once the proposed legislation has come into force.
HMRC say they will not give clearance based on the proposals.
