I move Financial Resolution No. 10:
(1) THAT section 14 of the Finance Act, 1986 (No. 13 of 1986), shall not apply or have effect in relation to any qualifying dividend (within the meaning of that section) that is paid on or after the 29th day of January, 1992.
(2) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
This Resolution relates to section 14 of the Finance Act, 1986, and proposes that the relief afforded by that section be abolished as respects dividends paid on or after today.
The relief operates by excluding from a charge to income tax one-half of the dividend income received by individual shareholders from companies qualifying for the 10 per cent rate of corporation tax. The maximum amount which can be excluded is £7,000 per annum, or £9,000 in the case of companies with approved profit-sharing schemes.
The main purpose behind the introduction of the relief in 1986 was to encourage equity investment in domestic manufacturing companies. There is little evidence that the relief has served its original purpose to any significant extent It has, however, been widely abused through several contrived arrangements, which maximised the Exchequer cost, and substituted tax-relieved dividends for taxable remuneration.
Taking all these considerations into account, the Government have decided to end the relief as respects manufacturing dividends paid on or after today.