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HMRC internal manual

International Manual

HM Revenue & Customs
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UK residents with foreign income or gains: corporation tax: Dividends: portfolio investors entitled to underlying tax: ESC/C1

Extra statutory concession ESC/C1 amplifies the statutory provisions under which a UK resident who receives dividends from a foreign company is entitled to credit for underlying tax paid by the foreign company on its profits. The concession is in two parts, C1(a) and C1(b).

Concession C1(a) gives relief to a portfolio shareholder (see INTM164010 paragraph (f)) for underlying tax on dividends received from a company resident in a country with which the UK has a double taxation agreement in force before the passing of FA 1965 and not renegotiated to exclude such dividends from relief for underlying tax. For many years to date (September 2010) the only countries affected have been Burma (now Myanmar) and St. Christopher (St. Kitts)-Nevis.

The credit article in these agreements entitles the UK resident recipient to relief for tax paid in those countries on the profits out of which the dividend is paid. The concession enables any UK tax or foreign tax in the third country payable by the company paying the dividend to be taken into account. If the company paying the dividend itself receives dividends from other companies, then the concession extends the relief to any direct tax on those dividends and any tax paid on the profits out of which such dividends are paid and so on through the chain of shareholdings.

See INTM164410 for the procedure to be followed in such cases.

Concession C1(b) which relates to insurance companies is dealt with in the General Insurance Manual and Life Assurance Manual.