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HMRC internal manual

International Manual

HM Revenue & Customs
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Distribution exemption: Interpretation: underlying tax

How to compute underlying tax

With effect from 1 July 2009 the onshore pooling rules have no further application. There can be no claims to EUFT for dividends paid after that date, nor can such dividends generate EUFT to carry back to earlier periods.

If a dividend is treated for the purposes of CTA09/S931H as paid out of profits other than relevant profits (and so is taxable - see INTM653090), those same profits represent the “relevant profits” for TIOPA10/S59 purposes.

Underlying tax is therefore computed according to the proportion of those profits that the dividend represents. The profits may arise in more than one year, in which case in computing the underlying tax credit it may be necessary to consider tax paid in more than one period. It will normally be appropriate to consider the relevant proportion of the tax paid on the whole of the profits in any period.