Budget Round-up – Tinkering improves DTR rules.

Experts believe the now infamous double tax relief rules have been improved by further tinkering in this year’s Budget.

But they are still convinced the legislation is overcomplicated and the regulations issued last week have left almost no time for consultation before they go live at the beginning of April.

The changes, the third set since DTR reform was announced in last year’s Budget, were even lambasted by William Hague, the Tory leader, as a ‘triple taxation retreat’ during his response to the Budget in the House of Commons.

The legislation replaced ‘offshore mixing’ with a new system of ‘onshore pooling’, but was widely condemned by accountants and multinational companies.

Since then, changes to the system have been announced, with further amendments put forward in last week’s Budget.

In particular overseas subsidiaries paying dividends to a UK-based parent company will be able to ignore rogue high tax rates for the benefit of pooling for tax relief purposes.

Roger Muray, international tax partner at Ernst & Young, called the adjustment a ‘very sensible change’ that companies would appreciate, but added: ‘What we have is something that is blindingly complicated because of a botched consultation.’

Business will have until Monday, just six days after the Budget, to let the Inland Revenue know their feelings about the regulations before the go-live date of 1 April. Fears are growing that a raft of amendments will be made at the last moment making it even harder for businesses to prepare.

Philip Ridgway, corporate tax partner at Deloitte & Touche, said: ‘It is still not clear when legislation affecting these changes will be announced.

Given that the rules will apply from 31 March 2001, UK multinational groups are placed in the difficult position of having to plan for profit repatriations without knowing the precise tax position.’

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