Commentary

D4.921 Qualifying foreign dividends

Corporate tax
Corporate tax | Commentary

D4.921 Qualifying foreign dividends

Corporate tax | Commentary

D4.921 Qualifying foreign dividends

The provisions in this article were repealed for distributions paid on or after 1 July 2009 following the introduction of the exempt distribution regime (see Division D5.1).

Qualifying foreign dividends are those dividends against which eligible unrelieved foreign tax can be offset. Qualifying foreign dividends are all dividends which fall within ICTA 1988, s 806A1 other than the following:

  1.  

    (a)     Dividends which represent an acceptable distribution policy dividend paid directly to a UK company by a controlled foreign company.

  2.  

    (b)     Any dividend representing an acceptable distribution policy cannot be a qualifying foreign dividend. This exclusion deals with the situation where a controlled foreign company is held through an offshore holding company and the acceptable distribution policy dividend paid by the lower tier controlled foreign company is paid up though the holding company in the UK. There are special rules to identify acceptable distribution policy dividends in this situation (see D4.926).

  3.  

    (c)     Any dividend on which eligible unrelieved foreign tax arises cannot be a qualifying foreign dividend. These dividends are termed 'tainted' dividends. This exclusion is a major pitfall in the onshore pooling regime and may well mean that, for the majority of UK companies holding subsidiaries through mixer companies, the onshore pooling regime leads to

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