Clause 150 - Non-resident companies: extent
Finance Bill
4:30 pm
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I am grateful to the hon. Gentleman for tabling this probing amendment to tease out the precise interactions between the clauses that follow on from clause 147. The amendment would upset the existing basis of computing the limit of income tax on foreign companies from investments in the UK other than property and from any trading in the UK through a broker or investment manager. At present, the maximum such foreign companies can pay is the tax, if any, deducted at source.
The clause is a consequential adjustment to replicate exactly the effect of section 128 of the Finance Act 1995 on foreign companies. It is necessary following the change from ''branch or agency'' to ''permanent establishment'' that is introduced by clause 147.
The subsection that the amendment seeks to leave out does not prevent double taxation relief from being claimed. The position regarding such relief remains exactly as it was, and the clause limits the income tax chargeable before double taxation relief, as was previously the case. The double taxation relief would be given in any assessment, subject to the usual rules. That ensures that the UK income tax liability of a non-resident company is properly aligned to the amount due in accordance with any relevant tax treaty.
I hope that the hon. Gentleman will accept that explanation. He may feel that he wants to study the issues a little more, but I hope that he is reassured that the clause is, as I said, a consequential adjustment to replicate exactly the effect of section 128 of the Finance Act 1995 on foreign companies.