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HMRC internal manual

International Manual

HM Revenue & Customs
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UK residents with foreign income or gains: dividends: Dividends received by UK companies on or after 31 March 2001 - eligible unrelieved foreign tax - Case B

The legislation relating to EUFT was repealed for distributions paid on or after 1 July 2009.

Underlying and withholding tax

  1. The mixer cap

Company B in country B pays a dividend of 50 up to company A in country A. Company B has paid tax of 50 on its profits, and a further 5 withholding tax is paid when the dividend is paid to A. Company A then pays a dividend of 45 up to the UK. The rate of corporation tax at all stages is 30% and the upper rate for EUFT is 45%.

Use this link to view The mixer cap diagram

  1. The dividend paid by A includes the dividend from B. The mixer cap (INTM164220) restricts credit for underlying tax at the level of B to: [(D + U) x M%] (50 + 50) x 30% = 30.
  2. At the level of A, the mixer cap formula gives (45 + 55) x 30% = 30. So no further restriction is due.


  1. Eligible unrelieved foreign tax


  1. The dividend is not one of those excluded under Section 806A(2) (see INTM164240) and EUFT can therefore arise on it.
  2. If the mixer cap used 45% as M rather than 30%, the formula at level B would have produced (50 + 50) x 45% = 45 Therefore EUFT arising at this level is 45-30 = 15.
  3. The formula is also reworked at level A, but tax and dividends relating to lower levels are excluded: ([45-50*] + [55-50] x 45% = 5 x 45% = 2.25. So an additional EUFT of 2.25 arises at this level. (*Note that a negative number is treated as a zero).
  4. So the total EUFT arising on this dividend is 17.25.

Case B EUFT arising on a mixed dividend will be calculated by Business International, Underlying Tax Group at Nottingham. They will supply this to the Tax Specialist in response either to a submission under INTM164440 or a request for assistance from the group.