A principal purpose of the legislation is to simplify the process of paying dividends to the UK. Amendment 50 would retain a significant body of complicated legislation on onshore pooling rules. I hope that I can persuade the hon. Gentleman that it would do so with little, or possibly no, benefit. It would retain the onshore pooling rules solely for the benefit of those dividends that a company elects to be taxable. Why would a company do that? The two most likely reasons are to obtain lower rates of foreign withholding tax and, during a transitional period, to allow dividends to qualify for the ADP exemption from controlled foreign company legislation, which we will come to later.
Although the onshore pooling rules can apply to withholding tax, by far their main application is in connection with underlying tax. It is rare that dividends that qualify for underlying tax credit also suffer withholding tax, because intra-group dividends are generally exempt from such taxes. ADP dividends are in all cases excluded from onshore pooling. It is not justified to retain onshore pooling and the significant amount of legislation on that for that very limited purpose. The rules were introduced in 2001 to balance the introduction of the so-called mixer cap. That need has been removed by dividend exemption, so the rationale for the onshore pooling rules will end as well. I hope that the hon. Gentleman feels that he can withdraw his amendment.