Income and Corporation Taxes Act 1988

4 (1) For the purposes of this Part of this Schedule, where—

(a) a controlled foreign company pays a dividend (“the initial dividend”) to another company which is also not resident in the United Kingdom, and

(b) that other company or another company which is related to it pays a dividend (“the subsequent dividend”) to a United Kingdom resident, and

(c) the subsequent dividend is paid at a time when the company paying it is not resident in the United Kingdom; and

F1 (d) the subsequent dividend is paid out of profits which are derived, directly or indirectly, from the whole or part of the initial dividend,

so much of the initial dividend as is represented by the subsequent dividend shall be regarded as paid to the United Kingdom resident [F2 and shall be taken to satisfy the conditions in paragraph 2(1A) above].

[F3 (1A) A payment to a company shall not be a subsequent dividend within the meaning of sub-paragraph (1)(b) above unless it is taken into account in computing the company’s income for corporation tax[F4 and—

(a) it is chargeable neither under Case I of Schedule D nor under Case VI of that Schedule in circumstances where by virtue of section 436, 439B or 441 profits are computed in accordance with the provisions of this Act applicable to Case I; or

(b) if it is chargeable under Case I, or under Case VI in the circumstances described in paragraph (a) above, it is not involved in a UK tax avoidance scheme;

and paragraph 4A below has effect for the purposes of paragraph (b) above.]]

(2) For the purposes of this paragraph, one company is related to another if [F5 neither is resident in the United Kingdom and] the other—

(a) controls directly or indirectly, or

(b) is a subsidiary of a company which controls directly or indirectly,

at least 10 per cent. of the voting power in the first-mentioned company; and where one company is so related to another and that other is so related to a third company, the first company is for the purposes of this paragraph related to the third, and so on where there is a chain of companies, each of which is related to the next.

Textual Amendments

F1 Repealed by 1990 s.67(3)(a)and s.132and Sch.19 Part IVin relation to dividends paid on or after 20March 1990.

F2 Words in Sch. 25 para. 4(1) inserted (with application in accordance with s. 82(8) of the amending Act) by Finance Act 2001 (c. 9), s. 82(4)

F3 1990 s.67(3)(c)in relation to dividends paid on or after 20March 1990.

F4 Words in Sch. 25 para. 4(1A) inserted (with application in accordance with s. 82(8) of the amending Act) by Finance Act 2001 (c. 9), s. 82(5)

F5 Words in Sch. 25 para. 4(2) inserted (with application in accordance with s. 82(8) of the amending Act) by Finance Act 2001 (c. 9), s. 82(6)