Income and Corporation Taxes Act 1988 (c. 1)

PART XVIII U.K. DOUBLE TAXATION RELIEF

Modifications etc. (not altering text)

C1 Pt. 18 modified (3.5.1994) by Finance Act 1994 (c. 9), Sch. 20 para. 10 (as amended by Finance Act 1995 (c. 4), s. 122(4)(5)) (with Sch. 20 para. 12(2)(a))

C2 Pt. 18 applied (with effect in accordance with Sch. 29 Pt. 14 of the affecting Act) by Finance Act 2002 (c. 23), Sch. 29 para. 87

C3 Pt. 18 modified (22.7.2004) by Finance Act 2004 (c. 12), s. 107(5)

C4 Pt. 18 applied by Finance Act 1996 (c. 8), Sch. 9 para. 12E(5) (as inserted (29.11.2007 with effect in accordance with regs. 1(2), 3(1) of the amending S.I. (as amended by S.I. 2008/1579, reg. 4(1))) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 1 para. 16)

C5 Pt. 18 applied by Finance Act 2002 (c. 23), Sch. 26 para. 30E(5) (as inserted (29.11.2007 with effect in accordance with regs. 1(2), 3(1) of the amending S.I. (as amended by S.I. 2008/1579, reg. 4(1))) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 1 para. 19)

C6 Pt. 18 applied by Finance Act 1996 (c. 8), Sch. 9 para. 12C(3) (as substituted (29.11.2007 with effect in accordance with regs. 1(2), 3(2) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 2 para. 8)

C7 Pt. 18 applied by Finance Act 2002 (c. 23), Sch. 26 para. 30C(3) (as substituted (29.11.2007 with effect in accordance with regs. 1(2), 3(2) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 2 para. 10)

C8 Pt. 18 applied by Finance Act 2002 (c. 23), Sch. 29 para. 87A(3) (as substituted (29.11.2007 with effect in accordance with regs. 1(2), 3(2) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 2 para. 12)

C9 Pt. 18 applied by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 140H(3), 140I(3), 140J(3) (as inserted (29.11.2007 with effect in accordance with regs. 1(2), 3(3) of the amending S.I. (as amended by S.I. 2008/1579, reg. 4(2))) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 3 para. 1)

C10 Pt. 18 applied by Finance Act 1996 (c. 8), Sch. 9 paras. 12H(3), 12I(3) (as inserted (29.11.2007 with effect in accordance with regs. 1(2), 3(3) of the amending S.I. (as amended by S.I. 2008/1579, reg. 4(2))) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 3 para. 2)

C11 Pt. 18 applied by Finance Act 2002 (c. 23), Sch. 26 paras. 30G(3), 30H(3) (as inserted (29.11.2007 with effect in accordance with regs. 1(2), 3(3) of the amending S.I. (as amended by S.I. 2008/1579, reg. 4(2))) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 3 para. 4)

C12 Pt. 18 applied by Finance Act 2002 (c. 23), Sch. 29 paras. 85B(3), 85C(3) (as inserted (29.11.2007 with effect in accordance with regs. 1(2), 3(3) of the amending S.I. (as amended by S.I. 2008/1579, reg. 4(2))) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), Sch. 3 para. 5)

C13 Pt. 18: power to amend conferred (1.4.2009 with effect in accordance with s. 1329(1) of the affecting Act) by Corporation Tax Act 2009 (c. 4), s. 533(2)(3) (with Sch. 2 Pts. 1, 2)

C14 Pt. 18 modified (with effect in accordance with s. 56(3) of the modifying Act) by Finance Act 2009 (c. 10), s. 56(1)

CHAPTER II U.K. RULES GOVERNING RELIEF BY WAY OF CREDIT

Modifications etc. (not altering text)

C15 Pt. 18 Chs. 1, 2 modified (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 277(1), 289 (with ss. 60, 101(1), 171, 201(3))

Tax underlying dividends U.K.

801 Dividends paid between related companies: relief for U.K. and third country taxes. U.K.

M1 (1) Where a company resident outside the United Kingdom (“the overseas company”) pays a dividend to a [F1 company falling within subsection (1A) below (“the relevant company”)] and the overseas company is related [F2 to the relevant company], then for the purpose of allowing credit under any arrangements against corporation tax in respect of the dividend, there shall be taken into account, as if it were tax payable under the law of the territory in which the overseas company is resident—

(a) any United Kingdom income tax or corporation tax payable by the overseas company in respect of its profits; and

(b) any tax which, under the law of any other territory, is payable by the overseas company in respect of its profits.

[F3 (1A) A company falls within this subsection if—

(a) it is resident in the United Kingdom; or

(b) it is resident outside the United Kingdom but the dividend mentioned in subsection (1) above forms part of the profits of a [F4 permanent establishment] of the company’s in the United Kingdom.]

(2) Where the overseas company has received a dividend from a third company and the third company is related to the overseas company, then, [F5 subject to subsection (4)] below, there shall be treated for the purposes of subsection (1) above as tax paid by the overseas company in respect of its profits any underlying tax payable by the third company, to the extent that it would be taken into account under this Part if the dividend had been paid by a company resident outside the United Kingdom to a company resident in the United Kingdom and arrangements had provided for underlying tax to be taken into account.

[F6 (2A) Section 799(1)(b) applies for the purposes of subsection (2) above only—

(a) if the overseas company and the third company are not resident in the same territory; or

[F7 (aa) if the overseas company is an ADP controlled foreign company as respects any of its accounting periods and the dividend mentioned in subsection (1) above is an ADP dividend of that company (in which case see also subsection (2B)); or]

(b) in such other cases as may be prescribed by regulations made by the Treasury.]

[F8 (2B) In any case falling within subsection (2A)(aa) above, section 799(1)(b) applies for the purposes of subsection (2) above as if for section 799(1A) there were substituted—

“(1A) The formula is—

where—

D is the amount of the dividend; and

X is the maximum relievable rate, expressed as a decimal fraction;

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) Where the third company has received a dividend from a fourth company and the fourth company is related to the third company, then, subject to subsection (4) below, tax payable by the fourth company shall similarly be treated for the purposes of subsection (2) above as tax paid by the third company; and so on for successive companies each of which is related to the one before.

(4) Subsections (2) and (3) above are subject to the following limitations—

(a) no tax shall be taken into account in respect of a dividend paid by a company resident in the United Kingdom except United Kingdom corporation tax and any tax for which that company is entitled to credit under this Part; and

(b) no tax shall be taken into account in respect of a dividend paid by a company resident outside the United Kingdom to another such company unless it could have been taken into account under the other provisions of this Part had the other company been resident in the United Kingdom.

[F9 (4A) F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4B) F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4C) F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4D) F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(5) For the purposes of this section a company is related to another company if that other company—

(a) controls directly or indirectly, or

(b) is a subsidiary of a company which controls directly or indirectly,

not less than 10 per cent. of the voting power in the first-mentioned company.

[F11 (6) For the purposes of this section—

(a) a controlled foreign company is an “ADP controlled foreign company” as respects any of its accounting periods if, by virtue only of section 748(1)(a), no apportionment under section 747(3) falls to be made as respects that accounting period;

(b) an “ADP dividend” of a controlled foreign company is a dividend by virtue of which the controlled foreign company is an ADP controlled foreign company as respects any of its accounting periods.

(7) In this section—

• “accounting period”, in relation to a controlled foreign company, has the same meaning as in Chapter 4 of Part 17 (see section 751);

• “controlled foreign company” has the same meaning as in Chapter 4 of Part 17 (see section 747(2)).]

Textual Amendments

F1 Words in s. 801(1) substituted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(8)(a)

F2 Words in s. 801(1) substituted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(8)(b)

F3 S. 801(1A) inserted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(9)

F4 Words in s. 801(1A)(b) substituted (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(1)(a)

F5 Words in s. 801(2) substituted (with effect in accordance with s. 91(8) of the amending Act) by Finance Act 2005 (c. 7), s. 91(5)

F6 S. 801(2A) inserted (with effect in accordance with Sch. 30 para. 11(3)(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 11(2)

F7 S. 801(2A)(aa) inserted (with effect in accordance with s. 89(5) of the amending Act) by Finance Act 2005 (c. 7), s. 89(2)

F8 S. 801(2B) inserted (with effect in accordance with s. 89(5) of the amending Act) by Finance Act 2005 (c. 7), s. 89(3)

F9 S. 801(4A)-(4D) inserted (with effect in accordance with Sch. 27 para. 3(4)(5) of the amending Act) by Finance Act 2001 (c. 9), Sch. 27 para. 3(3)

F10 S. 801(4A)-(4D) repealed (with effect in accordance with s. 91(8) of the repealing Act) by Finance Act 2005 (c. 7), s. 91(6), Sch. 11 Pt. 2(9), Note

F11 S. 801(6)(7) inserted (with effect in accordance with s. 89(5) of the amending Act) by Finance Act 2005 (c. 7), s. 89(4)

Marginal Citations

M1 Source—1970 s.508; 1971 s.26(2)