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HMRC internal manual

International Manual

Foreign tax paid on trade income: limitation on credit: 1998 legislation: Underlying relief

Limitations similar to those considered in INTM168080 onwards are applied by ICTA88/S803 (now rewritten as TIOPA10/S70) to the computation of relief for underlying tax applicable to dividends from connected overseas companies. Without such limitation it would be possible for banks to avoid the limitations imposed by ICTA88/S798 by arranging for loans to non-residents to be made by a connected overseas company which could then remit the profits back to the UK in the form of dividend. The definition of `bank’ in CTA10/S1120 does not apply for the purposes of Section 803.

ICTA88/S803 is applied by CTIAA Underlying Tax Group, Yorke House, Nottingham, in the normal course of determining the underlying tax rates applicable to foreign dividends from overseas companies (see INTM164440). It is not expected that many cases will arise. Any enquiries about ICTA88/S803 should be referred to the Underlying Tax Group.