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HMRC internal manual

International Manual

Double Taxation Relief: Anti avoidance legislation: Underlying tax

Many aspects of underlying tax relief are outside the scope of the legislation:

  • the operation of onshore pooling rules
  • the limitation imposed by the mixer cap
  • the question of the amount of foreign tax that is properly attributable to a dividend.

The legislation will apply in the following situation:

  • a company makes a return that includes underlying tax credit
  • the credit results, directly or indirectly, from the payment of tax by a foreign company
  • if that foreign company had been UK resident and had made a tax return that included credit for the foreign tax, the legislation would have applied to that company.

If all of the above apply, the legislation will reduce the underlying tax credit in line with the reduction that would have applied to the foreign company, if the legislation had applied to it.