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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: exemptions - Acceptable Distribution Policy ('ADP'): Dividends paid out of distributions from a United Kingdom company

The ADP exemption was abolished in FA09 for accounting periods of CFCs beginning on or after 1 July 2009. This guidance only applies to APs ending on or before 30 June 2009 


A dividend will not count towards satisfying an acceptable distribution policy to the extent that the relevant profits under ICTA88/S799 out of which the dividend is paid, include dividends or other distributions received by the overseas company from the United Kingdom, and which were (or would be) exempt from corporation tax under ICTA88/S208, if the company was (or were deemed to be) UK resident when they were received. The purpose of this provision is to prevent companies satisfying an acceptable distribution policy by means of UK dividends which, while excluded from the chargeable profits, are paid as dividends to the UK where UK underlying tax is available against the Case V charge.

The provision applies in respect of overseas companies with accounting periods ending on or after March 9t h 1999, but only in respect of dividends paid to the UK on or after that date. The provision applies whether or not the relevant profits include distributions received from the UK before that date.