This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

International Manual

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The legislation relating to EUFT was repealed for distributions paid on or after 1 July 2009.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

Dividend 100
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
Credit available:  
Underlying tax as capped 36.99
Withholding tax 10.00
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.