New legislation passed in October 2009 with retroactive effect from 1 January 2009 means that dividends from all investments now potentially qualify for exemption from SDC. The rule that a minimum of 1% must be held in the investment to qualify for exemption has been removed. The other provisions for exemption, however, remain, namely the requirement to either generate more than 50% of the company income from trading or to be taxable at rates exceeding 5% in the country where dividends are earned.

More importantly, interest earned outside the ordinary course of business (i.e. non-trading interest income) is no longer taxed  to Corporation tax and only SDC will apply. Until now non-trading interest income was tax at the reduced rate of 5%.