Finance Act 2001

Restriction of relief for underlying tax

2 (1) Section 799 of the Taxes Act 1988 (computation of underlying tax) is amended as follows.

(2) For subsection (1A) (the formula for restricting the amount of underlying tax in respect of which credit relief may be given) substitute—

“(1A) The formula is—

where—

• D is the amount of the dividend;

• U is the amount of underlying tax that would fall to be taken into account as mentioned in subsection (1) above, apart from paragraph (b) of that subsection; and

• M% is the maximum relievable rate;

and for the purposes of this subsection the maximum relievable rate is the rate of corporation tax in force when the dividend was paid.”.

(3) After subsection (1A) insert—

“(1B) Where, under any arrangements, a company makes a claim for an allowance by way of credit in accordance with this Chapter—

(a) the claim may be so framed as to exclude such amounts of underlying tax as may be specified for the purpose in the claim; and

(b) any amounts of underlying tax so excluded shall be left out of account for the purposes of this section.”.

(4) This paragraph has effect in relation to any claim for an allowance by way of credit made on or after 31st March 2001 in respect of a dividend paid by a company resident outside the United Kingdom to a company resident in the United Kingdom, unless the dividend was paid before that date.

(5) In determining, for the purpose of any such claim made on or after that date, the underlying tax of any such third, fourth or successive company as is mentioned in section 801(2) or (3) of the Taxes Act 1988, this paragraph shall be taken to have had effect at the time the dividend paid by that company was paid.