Commentary

D4.906 Extension of underlying tax relief

Corporate tax
Corporate tax | Commentary

D4.906 Extension of underlying tax relief

Corporate tax | Commentary

D4.906 Extension of underlying tax relief

FA 2009 introduced the exempt distribution regime which broadly provides that most dividends received by a UK company on or after 1 July 2009 (from the UK or overseas) will be exempt from corporation tax (see Division D5.1). The provisions discussed in this article apply to overseas dividends received on or after 1 July 2009 that are not exempt and all other overseas dividends received before 1 July 2009.

Underlying tax credit relief provided by agreements is quite limited since it applies only to tax paid in the territory which is the other party to the agreement. It does not include taxes paid in third territories or underlying tax paid by companies which have themselves paid dividends to the first-tier foreign company. Accordingly, the basic relief provided under agreements is extended by statutory provisions as detailed below.

Tax paid in other territories

Where tax is paid both in the UK and in third countries (ie any territory other than the country of residence) the credit relief may be extended in certain situations1.

Where an overseas company pays a dividend to a company resident

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