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HMRC internal manual

International Manual

Reliefs against Controlled Foreign Companies' tax: Relief available to purchaser of an interest in the Controlled Foreign Company

It should be noted that the relief may be available to companies which have not themselves self assessed under Chapter IV. Where a company which has self assessed under Chapter IV disposes of its shares in the controlled foreign company and its successors in title receive the dividends, then the successors may be entitled to relief.


The chargeable profits of controlled foreign company X which arise in year 1 are apportioned to United Kingdom resident companies A and B. Both have interests greater than 25% and so have self assessed under Chapter IV. In year 2, A disposes of its interest in X to United Kingdom resident company C (which may or may not be a company connected or associated with A), and X pays dividends to B and C out of the profits of year 1.

The effect of ICTA88/SCH26/PARA4 is that the tax self assessed by A and B attaches as underlying tax to the dividends which X pays to B and C. The underlying relief is however restricted if, on disposing of its interest in X, A claimed a deduction in the capital gains computation (see INTM256220) for the tax it self assessed under Chapter IV in respect of X.