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HMRC internal manual

International Manual

UK residents with foreign income or gains: dividends: Dividends received by UK companies on or after 31 March 2001: eligible unrelieved foreign tax - order of carry back

The legislation relating to onshore pooling was repealed for distributions paid on or after 1 July 2009.

ICTA88/S806E sets out the rules for carrying back relievable tax under S806D.

  • The accounting periods must be accounting periods beginning not more than three years before the accounting period in which the relievable tax arises;
  • Credit for relievable tax must be given against the single dividend arising in a later one of these before being given in an earlier one;
  • Before allowing credit for any of the relievable tax against the single dividend, credit
  1. firstly, aggregated foreign tax in respect of the single dividend for that period (so far as it does not consist of relievable tax arising in another accounting period)
  2. secondly, relievable tax arising in any accounting period before that in which this relievable tax arises.

However the amount of credit given must not exceed the CT liability on that single dividend: i.e. it cannot produce eligible unrelieved foreign tax (EUFT).


  Single dividend UK liability (say 30%) Aggregated foreign tax
Year 1 1500 450 400
Year 2 2000 600 500
Year 3 1200 360 300
Year 4 1000 300 340
Year 5 1000 300 700

The 340 relievable tax arising in Year 4 will be set:

  • 300 against tax due in Year 4;
  • then 40 against tax due in Year 3, after crediting 300 arising in year 3 itself.

The 700 relievable tax arising in Year 5 will be set:

  • 300 against tax due in Year 5;
  • then 20 against remaining tax due in Year 3;
  • then 100 against tax due in Year 2, after crediting 500 arising in the year;
  • and the remaining 280 must either be carried forward or relieved within the group (see INTM164330)

Relievable tax may be either underlying tax or withholding tax.

Under ICTA88/S806F credit should be given, as far as possible in the following order:

  1. underlying tax (where allowable) ;
  2. withholding tax;
  3. amounts ‘treated as underlying tax’; and finally
  4. amounts ‘treated as foreign tax other than underlying tax’.