Clause 22 - Treatment of the receipt of manufactured overseas dividends

Part of Finance Bill – in a Public Bill Committee at 4:45 pm on 12 June 2012.

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Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education) 4:45, 12 June 2012

It is a pleasure to serve under your chairmanship again this afternoon, Mr Bone.

I seek a couple of points of clarification from the Minister on clause 22. The clause seeks to clarify the legislation on manufactured overseas dividends, thereby blocking a tax avoidance scheme. The legislation provides that, where MODs are received under deduction of tax, some or all of that tax may be treated as overseas tax. The clause makes it clear that, where there is a difference between the tax deducted and the tax treated as overseas tax, the difference is not treated as income tax. The clause makes a similar change for deemed manufactured payments under some stock lending arrangements.

The clause affects overseas dividends received on or after 15 September 2011, and I seek clarification on that date. Under the avoidance scheme, the recipient of a manufactured overseas dividend claims to have received it under deemed deduction of UK income tax, and seeks to set off the dividend against its corporation tax liability via double tax relief. Will the Minister clarify when the scheme was first disclosed to Her Majesty’s Revenue and Customs? How soon after that disclosure did the Government take the action that they are now putting into statute to clamp down on the avoidance? What receipts are expected from the measure?