Due to an oversight at Finance Bill time, the rules for giving double taxation relief on foreign income did not get altered to reflect the reduction in the Corporation Tax rate. The Financial Secretary has given assurance that double taxation relief will not be restricted by reason of this unintended mismatch.

HMRC will work with the Confederation of British Industry and others to identify the most appropriate solution, consistent with the elimination of double taxation of dividend income and will publish draft clauses for comment.

The problem will be addressed in next year's Finance Bill, with provisions backdated to 1 April 2008 to ensure that no income faces double taxation. In the meantime, HMRC will use its statutory discretion to give the necessary double taxation relief.

Further information is available at http://www.hmrc.gov.uk/news/mixer-cap-ct-rate.htm.