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HMRC have published Brief 76/09, which covers the changes made by Finance Act 2009 to the scope of income tax credits for individuals in receipt of dividends from foreign companies.

The changes take effect from 22 April 2009 for the current tax year and affect shareholders with a holding of ten per cent or more of the issued share capital of the company concerned and shareholders in offshore funds.

The Tax Credits (Excluded Companies) Regulations 2009 (SI 2009/3333) come into force on 22 April 2009 and have effect from that date for the tax year 2009–2010 and subsequent tax years. Broadly, the regulations modify the effect of ITTOIA 2005, s. 397BA (inserted by FA 2009) so that the one-ninth
income tax credit is not available to an individual receiving a dividend from a foreign company if that company is one which, although resident in what would otherwise be a ‘qualifying territory’, is denied treaty benefits by express provision in the UK’s double taxation treaty with that territory.

In addition to the above regulations, the Distributions (Excluded Companies) Regulations 2009 (SI 2009/3314) came into force on 15 December 2009 and have effect for accounting periods that were current on that day and for accounting periods beginning after that day. These regulations modify the effect of CTA 2009, s. 931C so that a distribution is not exempt from corporation tax in the hands of the recipient company if the distribution is paid by a company which, although resident in what would otherwise be a ‘qualifying territory’, is denied treaty benefits by express provision in the UK’s double taxation treaty with that territory.