INTM211140 - Reliefs against Controlled Foreign Companies' tax
Relief for dividends paid by a Controlled Foreign Company: main conditions
ICTA88/SCH26/PARA4(1) to (3)
The main conditions for obtaining relief for Chapter IV tax against liability on a dividend paid by a controlled foreign company are that-
- the chargeable profits of the company for that period have been apportioned; and
- the company pays a dividend in whole or in part out of the total profits from which those chargeable profits are derived.
Where the company can show that profits included in the total
profits of the accounting period to which apportionment relates
were distributed out of the profits of a different period relief
may be given for Chapter IV tax paid as if the distribution were
out of the total profits of the apportionment period. This is
provided that the distribution is not used to satisfy the
acceptable distribution policy for another accounting period under
ICTA88/SCH25/PARA2A(2) (see
INTM204060).
It is not necessary for the dividend to be paid after a
Chapter IV assessment. Where a dividend is paid prior to the
apportionment of chargeable profits, relief against the liability
on the dividend is available subject to the same conditions as in
the case where the dividend is paid later. It is not however
possible to set Corporation Tax charged on the dividend under Case
V of Schedule D against the tax due under Chapter IV in respect of
the apportioned chargeable profits.
Relief under these provisions will be due where dividends
paid to the United Kingdom have not satisfied the acceptable
distribution policy (either because they are insufficient in amount
or because they were paid outside the time-limit) and an
apportionment is due.
