Amendments allowing companies to continue the practice of pooling foreign earnings to minimise British tax liabilities were announced in an Inland Revenue statement this afternoon.
‘The government’s discussions with business have led it to conclude that there are circumstances in which a limited form of onshore pooling of foreign tax on dividends will be allowed, where this involves genuine business activity,’ the statement said.
But the government refused to back down from chancellor Gordon Brown’s proposed ban on the use of Controlled Foreign Companies to avoid tax.
The measures are intended to tackle tax avoidance, with a firm clampdown on abuse of offshore holding companies. It is also aimed at protecting the tax base, and underpin the government’s broader aims for the UK corporate tax system.
Whitehall officials maintain its twin objectives of tackling tax avoidance while ensuring the attractiveness and competitiveness of the UK for business will be met.
Treasury officials believe the tax revenue from the revised package of measures will be almost identical to that of the scheme announced in the chancellor’s Budget day speech.
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