The British tradition of worldwide taxation – a legacy of William Pitt – could be swept away in favour of a European-style system under proposed Treasury reforms of corporate tax expected in a consultation document to be published this spring.

Elsewhere in Europe, most dividends are tax-exempt. But the UK system only exempts dividends from British subsidiaries. A British parent company receiving a dividend from an overseas subsidiary will be taxed, though it will be given credit for taxes paid overseas.