Commentary

D4.940 'Bought in' foreign tax credits

Corporate tax
Corporate tax | Commentary

D4.940 'Bought in' foreign tax credits

Corporate tax | Commentary

Anti-avoidance

D4.940 'Bought in' foreign tax credits

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.

An anti-avoidance section1 was introduced to counter schemes for claiming what were termed 'bought-in' foreign tax credits. It has effect for dividends paid to a company resident in the UK on or after 26 November 1996. (It should be noted that, following the introduction of the mixer cap (see D4.915), for dividends paid to the UK on or after 31 March 2001, these provisions will be largely redundant although, dependent on the fact pattern, it may be effective in preventing the buying and selling of companies with eligible unrelieved foreign tax.

HMRC were concerned that UK groups of companies had entered into schemes under which they acquired for a

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