Double Taxation Relief Manual: Guidance by country: USA: Underlying Tax
Documents needed to support the underlying tax claim
Pages 1, 3 and 4 of the US tax return form 1120 showing tax and balance sheet.
Form 1118 for a claim for foreign withholding tax.
The starting point is the Net income per books shown at line 2 of Schedule M-2. Other increases at line 3 that are distributable should be included in relevant profits. Other decreases at line 6 may be deductible in arriving at relevant profits. (Attach relevant supporting schedules). The use of US GAAP accounts is acceptable if done on a consistent basis.
consolidation: Section 803A ICTA 1988
See INTM 164150 and Tax Bulletin 57.
Dividends included in the net income per books from outside the tax consolidation may carry underlying tax to be added to the group tax. US state and city etc taxes are added to the group’s Federal tax.
For dividends paid to the UK on or after 21 March 2000 ICTA88\S801B applies. The relevant profits include the distributable equity in the profits of subsidiary companies. Equity losses are deductible in arriving at relevant profits. See INTM 164180.
For dividends paid to the UK before 21 March 2000 credit is available for tax underlying equity profits if the parent company’s own profits (excluding equity but including dividends received) are insufficient to cover the dividend paid by the parent company. If the parent company’s own profits (including dividend income) are sufficient to cover its dividend, relevant profits exclude equity but include dividend income, with tax underlying the equity excluded and tax underlying dividend income creditable in the usual way.