FINANCE BILL 2000
CLAUSE 33: DEDUCTION OF INCOME TAX FROM FOREIGN DIVIDENDS
SUMMARY
1. This clause reduces the rate of income tax to be deducted from foreign dividends by paying and collecting agents to 10 per cent for 2000-01. It also deems that rate to have applied for 1999-00.
DETAILS OF THE CLAUSE
2. Subsection (1) sets the rate of income tax to be deducted from foreign dividends at 10 per cent.
3. Subsection (2) provides that the 10 per cent. rate shall have effect for 2000-01 and shall also be deemed to have had effect for 1999-00 as well.
BACKGROUND
4. Historically foreign dividends received by UK residents have been subject to UK tax at the lower and higher rates as appropriate. Where received through a UK Paying or Collecting Agent (broadly UK financial institutions) there was a requirement for UK tax to be deducted at the lower rate thus satisfying the liability of any recipient to tax at the basic rate.
5. From 6th April 1999 the liability was reduced from the lower rate to the Schedule F ordinary rate of 10 per cent. A corresponding reduction should also have been made in the rate of tax to be deducted by Paying and Collecting Agents but was overlooked.
6. We believe that Paying and Collecting Agents have in fact been deducting tax at 10 per cent. since April 1999. This clause sets that deduction on the correct statutory footing.
7. The Paying and Collecting Agent schemes will be terminated with effect from 1 April 2001, see Clause 110.