Interest relief proposals delayed by Treasury

The much-anticipated consultation document on interest relief,
controlled-foreign companies and foreign dividends is expected to be launched by
the Treasury in
late June or early July.

According to PricewaterhouseCoopers
, the crucial consultation was initially scheduled for early spring but
is now more likely to be announced next month or even in July.

In a release on the firm’s PwC Plus
site, it said: ‘While the expected date of its publication had slipped to
mid-June, it now seems likely that it may not arrive until late June or even
early July.’

The consultation follows significant victories in the European Court of
Justice for Cadbury Schweppes on CFCs, M&S on group loss relief and an
decision on
investment income
. These cases have meant that great swathes of UK
tax law is untenable. 

According to PwC, the consultation will be ‘the most important issue in the
international tax arena for the next few years’. Pressure has been mounting on
the government to acknowledge the decisions in Europe and respond to the UK tax
competitiveness debate.

The consultation could see the Treasury consider limiting interest relief on
debt, or limiting the scope of CFC rules through specific legislation.

The consultation was first announced in the 2007 Budget and follows informal
consultation on the various issues.

Further reading:

Treasury moves to keep UK tax system competitive

ECJ forces review of multi-national tax

relief measures ‘will make UK less attractive’

Related reading

HMRC banknotes