Inland Revenue 14
                                                  17 March 1998
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        REVIEW OF DOUBLE TAXATION RELIEF FOR COMPANIES

The government attaches great importance to relief of double
taxation and  recognises its particular importance to UK
companies investing abroad.  With that  in mind the Chancellor
announced today that the Inland Revenue will consult  business
on opportunities to modernise the system of double taxation
relief for  companies.

The consultation process will involve a review of the
functioning and the fairness of  the existing system, its
effectiveness in meeting the objectives of the relief and 
business' compliance costs, while having regard to the overall
cost of the relief.  

Views will be invited on the ways in which these issues could
be addressed.  A  consultative document will be issued in due
course.

The wider international issues will also be considered,
including the approaches  taken by other countries. 

It is anticipated that any proposals for changes in the law
that come from the review  will be included in a future
Finance Bill.


DETAILS
 
1.   Double taxation arises when income is taxed both by the
taxpayer's  country of residence and by the country in which
the income arises.  The most  common United Kingdom approach
to relieving double taxation is to tax the  foreign income of
a United Kingdom resident but to deduct the foreign tax paid 
on the item of income from the corresponding United Kingdom
tax.   Alternatively, the foreign tax may be treated as
reducing the amount of the  income on which United Kingdom tax
is charged.
 
2.   The purpose of double taxation relief is to remove or
reduce the  disincentive that double taxation represents to
outward investment.  It is  estimated that in 1997-98 5.3
billion pounds of relief will be given against income tax and 
corporation tax.  A key part in that is played by double
taxation agreements that the  United Kingdom has entered into
with other countries.  More than 100 of these are  now in
force.
                                             
3.   Some of the existing legislation on double taxation
relief is several  decades old.  The Inland Revenue will in
due course consult business and  other interested parties
about the proposals for change that might be  considered.  In
the meantime suggestions for matters that the review should 
take into account should be sent to:

Mike Waters         
International Division (Double Taxation)
138-142 The Strand
London
WC2R 1HH.
 
4.   It is envisaged that principles emerging from the review
might ultimately  feed through into changes to the system of
double taxation relief for individuals. 
INLAND REVENUE PRESS OFFICE
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