HC Deb 26 March 1993 vol 221 c745W
Mr. Dewar

To ask the Chancellor of the Exchequer what would be the effect of restricting tax relief on dividends to 25 per cent. in 1993–94, 1994–95 and 1995–96.

Mr. Dorrell

When a United Kingdom resident company pays a dividend to a United Kingdom resident shareholder, the shareholder receives a tax credit from the Exchequer. Under the Chancellor's Budget proposals, the value of the tax credit is being reduced, for dividends paid after 5 April 1993, from 25 per cent. of the value of the dividend and credit to 20 per cent. The effect of this proposal is described in the "Financial Statement and Budget Report" and the Inland Revenue Budget day press release.

Dividends are not deductible in calculating profits liable to corporation tax, but the advance corporation tax a company pays when it pays a dividend can be set off against the corporation tax on its profits. Under the Chancellor's Budget proposals, that set off will be reduced to 22.5 per cent. in 1993–94 of taxable profits, and to 20 per cent. for 1994–95 and subsequent years.

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