The restrictions on the carry-back of income tax relief to the previous tax year will be removed.  This will apply to 2009/10 and subsequent years.  With effect from 22 April 2009, further changes will be introduced to simplify and improve the EIS rules.

Loan relationships

Where trade debts between connected companies are released after 22 April 2009, the debtor companies will no longer be taxed on the debts released.  For accounting periods beginning on or after 1 April 2009, deductions for interest payable to certain connected foreign companies will now be available on a paid basis rather than on the accruals basis.

Foreign profits

Legislation is to be introduced to ensure that dividends and other distributions received from foreign companies on or after 1 July 2009 will largely be exempt from corporation tax. UK distributions will be exempt to the same extent.  Finance expense payable by UK members of a group of companies will be subject to a cap equal to the consolidated gross finance expense of the group.  This will apply to amounts payable in accounting periods beginning on or after 1 January 2010.  With effect from 1 July 2009 there will be changes to the controlled foreign companies rules and the Treasury Consent rules will be replaced.

Corporate transparency

For accounting periods beginning on or after Royal Assent, the senior accounting officers of large companies and large groups of companies will have reporting obligations aimed at ensuring that the accounting systems are adequate for the purposes of accurate tax reporting.  These obligations will be supported by penalties chargeable on the senior accounting officer personally and on the company.

Anti-avoidance

A number of measures will be introduced to tackle anti-avoidance.  These will affect:

• Intra-group convertible finance
• Derecognition of income from derivative contracts
• Plant and machinery leasing
• Foreign exchange matching
• ‘Disguised interest’
• Exploitation of qualifying loan interest relief
• Real Estate Investment Trust (REIT) regime
• Double tax relief where foreign tax is repaid
• Receipts derived from a right to receive income.

With the publishing of the 2008 Finance Act, the UK overtook India as the country with the longest tax code world.