Schedule 19
Finance Bill
9:00 am
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I beg to move amendment 169, in schedule 19, page 202, line 15, leave out from ‘397AA’ to end of line 18.
I hope that this amendment will sail through as easily as the first one that we debated this morning. However, as the Financial Secretary has not appended his name to it, I suspect that it will run into heavier water.
Since 6 April 2008, individual shareholders with holdings of less than 10 per cent. in non-UK-resident companies have been entitled to a non-payable dividend tax credit. However, that tax credit was disapplied for dividends received from offshore funds in the Finance Act 2008, to counter the inequality of treatment of distributions received from onshore and offshore bond funds. Schedule 19 will restore the non-payable dividend tax credit for distributions received from corporate offshore funds that are largely invested in equities.
The 10 per cent. ownership threshold is removed for dividends paid by offshore funds, subject to anti-avoidance rules. However, when an offshore fund invests more than 60 per cent. of its assets in interest-bearing assets, or those that are economically similar, individuals receiving distributions will be treated for tax purposes as having received interest income and not a dividend or other type of distribution. As a result, no tax credit will be available and the tax rates applied will be those that apply to interest. Those rules will have effect from 22 April 2009. That starting date is the subject of amendments 167, 166 and 168, which are in the next group.
Amendment 169 relates to the provision of tax credits to individuals in receipt of dividends in non-UK resident companies, subject to certain provisions. Under the new provisions, a tax credit will be made available to shareholders in a company resident in a qualifying territory. The amendment would give certainty that, once a territory is designated as a qualifying territory and has passed the legislative test, the Treasury will not be able by regulation to disqualify it. The amendment would provide greater certainty for taxpayers that, once a qualifying territory has passed the legislative test, there can be no subsequent change to its status.