INTM164170 - UK residents with foreign income or gains: dividends

Underlying tax - pre-merger profits - dividends paid to the UK before 21 March 2000

It is a condition of relief for underlying tax that the tax is paid by the same overseas company that pays the dividend to the United Kingdom company which claims the relief. That condition may not be satisfied if overseas company A earns profits and pays tax on them but then merges with overseas company B in such a way that company A ceases to exist and its undistributed profits are taken over by company B. This is because there is no common identity between the company that paid the tax on those profits (company A) and the company that pays the dividend out of those profits to the UK company (company B).

The Underlying Tax Group has considered the effect of a merger in various countries and individual States in the USA. In many cases, relief will still be due for merged profits because of the terms of the particular company law involved.

Claims that relief is due on merged profits included in a dividend paid to the UK before 21 March 2000 will be considered by the Underlying Tax Group in CT & VAT, International CT. They should be sent initially, as part of the claim to relief for the underlying tax concerned, to Underlying Tax Group, Fitz Roy House, Nottingham with other details of the claim ( INTM164440).