D4.916 Capping at more than one level
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.
Set out below is an example of the mixer cap applying at more than one level in a chain of overseas companies, A, B and C, which are owned ultimately by a UK company. It is assumed that the dividends are not exempt (see Division D5.1) and are paid to the UK on 31 March 2015, which is also the accounting year end of each of the companies.
The following dividends are paid up the chain—
|Dividend paid by||Profit after tax||Dividend||Underlying tax|
|C (paid to B)||13,000||13,000||7,000|
|B (paid to A)||12,000||25,000||8,000|
|A (paid to UK Co)||16,000||41,000||4,000|
It is assumed that the dividend from overseas company C is exempt from tax in overseas company B, and that the dividend from overseas company B is exempt from tax in overseas company A.
The mixer cap is calculated at each level as follows—
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