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HMRC internal manual

International Manual

UK residents with foreign income or gains: dividends: Underlying tax - pre-merger profits - dividends paid to the UK on or after 21 March 2000

For dividends paid into the UK on or after 21 March 2000 the position has been put on a statutory basis by TIOPA10/S69.

This section applies where:

  • a non-resident company (Company A) has paid tax under the law of an overseas country on any of its profits;
  • some or all of them become profits of another non-resident company (Company B) otherwise than by paying a dividend to B;
  • and B then pays a dividend out of those profits to another company wherever resident.

In these circumstances the underlying tax in relation to any consequent dividend paid into the UK by any non-resident company is determined as if B had paid the tax paid by A in respect of the transferred profits.

However TIOPA10/S69(3) limits the relief to the amount that would have been allowable if the profits had been paid as a dividend.

This section can apply in any situation where profits have been transferred without paying a dividend, although the most common circumstance will be where a merger has taken place.

The rate of underlying tax will be determined by CTIAA Underlying Tax Group, Yorke House, Nottingham and details of the claim should be sent to them in accordance with INTM164440. Any queries on the operation of Section 69 should be referred to them.