§ Sir William Clarkasked the Chancellor of the Exchequer what changes he proposes to the rules governing double taxation relief for banks engaged in overseas lending.
§ Mr. RidleyAs my right hon. and learned Friend announced in his Budget Statement, we intend to take action this year to restrict the double taxation relief given432W to banks for foreign tax on the interest they receive from lending to non-residents. Following consultation with the main banking associations, we propose to limit the relief on all banks' overseas loans to a maximum of 15 per cent. of the gross interest. In those cases where credit is allowed for tax forgone or "spared" by the overseas country we propose in addition for the purposes of United Kingdom tax to treat the banks' income as increased by the amount of the tax "spared".
We intend that these changes will apply generally from 1 April 1982, but in the case of loans in existence at that date only to interest arising on or after 1 April 1983. We intend to introduce the necessary legislation at Committee stage of this year's Finance Bill.