D4.908 Relevant profits

Corporate tax
Corporate tax | Commentary

D4.908 Relevant profits

Corporate tax | Commentary

D4.908 Relevant profits

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.

Relevant profits for a dividend paid by a company resident outside the UK to a company resident in the UK are1:


    (a)     profits that are not 'relevant profits' for the purposes of the exemption 'dividends derived from profits not designed to reduce tax', (see D5.153–D5.157); or


    (b)     in a case not falling within (a) above, the profits of any period shown as available for distribution in the accounts of the company which pays the dividend. Unless the dividend is declared for a specified period, it is treated as paid out of the profits of the last accounting period ending before the payment of the dividend.

The accounts must be drawn up in accordance with the law of the company's home state and making no provision for reserves, bad debts, impairment losses or contingencies other than such as is required to be made under that law. It is understood that this statutory definition of relevant profits should not generally affect most of the practices set out in HMRC's leaflets referred to at D4.910.

While the legislation defines 'home

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