UK residents with foreign income or gains: dividends: Determination of rates of foreign underlying tax - Case V computations - dividends received on or after 31 March 2001 with withholding tax
The legislation relating to EUFT was repealed for distributions paid on or after 1 July 2009.
An Officer has referred a dividend to the Underlying Tax Group (UTG) under INTM164440. The cash dividend received was 90, as 10% withholding tax was deducted on payment. The rate of corporation tax for the year is 30% and the “upper rate percentage” is 45%. In accordance with INTM164460 the UTG supplies the following:
|Actual rate of underlying tax||42%|
|Capped rate of underlying tax||27%|
|Amount of Eligible Unrelieved Foreign Tax||18|
|Foreign Income computation:||Dividend (90 + 10)||100.00|
|plus underlying tax|
|100/58 x 42||72.00|
|Tax at 30%||51.60|
|To calculate the foreign tax credit, apply the capped rate to the dividend|
|100/73 x 27||36.99|
|Net UK liability||14.61|
The Case B EUFT notified by the UTG of 18 is all underlying tax.
But there is also a further amount of Case A EUFT (see INTM164250) of 10 in respect of the withholding tax:
|CT due if the CT rate were 45%, the ‘upper percentage’ - 172 x 45%||77.40|
|Underlying tax as capped||36.99|
|Amount that would be creditable||46.99|
|Amount actually credited||36.99|
|Case A EUFT||10.00|
The total of 28 EUFT can be used against pooled dividends (see INTM164270)
The underlying tax element can be used only against the Single Related Qualifying Dividend: the withholding tax element can be used against either of the Single Related or Unrelated Dividend.