Income and Corporation Taxes Act 1988

246P Notional foreign source advance corporation tax. U.K.

(1) As regards the company mentioned in section 246N(1), the amount of notional foreign source advance corporation tax for the relevant period is the amount of advance corporation tax which—

(a) the company would have paid in respect of distributions made by it in the relevant period, and

(b) would not have been set off against the company’s corporation tax liability for the relevant period under section 239(1),

on the assumptions mentioned in subsection (2) below.

(2) The assumptions are that—

(a) the qualifying foreign income dividends were the only distributions made by the company in the relevant period,

(b) no distributions were received (or treated for the purposes of section 246F as received) by the company in the relevant period,

(c) no amounts of advance corporation tax were by virtue of section 239(3) or (4) or section 240 treated for the purposes of section 239 as having been paid in respect of distributions made by the company in the relevant period,

(d) the benefit of the advance corporation tax paid in respect of distributions made by the company in the relevant period was not surrendered under section 240;

(e) the company’s profits for the relevant period on which corporation tax fell finally to be borne consisted of the matched foreign source profits and no other profits, and

(f) the amount of corporation tax charged in respect of a matched foreign source profit actually arising in an accounting period other than the relevant period was found by reference to—

(i) the rate of foreign tax, within the meaning given by section 246I(9), actually chargeable in respect of the profit (having regard to the time when it arose), and

(ii) the rate of corporation tax that would have applied had the profit arisen in the relevant period.

(3) A foreign income dividend is a qualifying foreign income dividend if—

(a) it is a matched foreign income dividend paid by the company in the relevant period, and

(b) the company has elected for it to be a qualifying foreign income dividend.

(4) A foreign income dividend the whole of which is, at the material time, matched with the whole or part of a distributable foreign profit of the company is a matched foreign income dividend.

(5) Where there is a foreign income dividend only part of which is at the material time matched as mentioned in subsection (4) above, the part of the dividend which at that time is so matched shall be treated for the purposes of this section as a separate dividend and, accordingly, as a matched foreign income dividend.

(6) The company may elect that matched foreign income dividends paid by it in the relevant period are qualifying foreign income dividends only if the amount found under paragraph (a) of subsection (7) below exceeds the amount found under paragraph (b) of that subsection; and where there is such an excess the election may only be made as regards matched foreign income dividends whose total amount is the same as or less than the amount of the excess.

(7) The amounts referred to in subsection (6) above are—

(a) the total amount of foreign income dividends paid by the company in the relevant period (other than excluded dividends);

(b) the total amount of foreign income dividends received (or treated for the purposes of section 246F as received) by the company in the relevant period;

and for the purposes of this subsection an excluded dividend is a foreign income dividend which by virtue of section 246G(2) is not capable of being matched.

(8) A matched foreign source profit is a foreign source profit of which a matched distributable foreign profit forms part; and for the purposes of this subsection “a matched distributable foreign profit” means a distributable foreign profit of the company the whole or part of which is, at the material time, matched with a qualifying foreign income dividend, or with part of such a dividend, or with different such dividends or parts.

(9) Where the matched foreign source profit is a foreign source profit of which a partly matched distributable foreign profit forms part, for the purposes of any calculation required by subsections (1) and (2) above the amount of the matched foreign source profit shall be taken to be reduced by an amount which bears to the full amount of the matched foreign source profit the same proportion as the unmatched part of the distributable foreign profit bears to the amount of the distributable foreign profit.

(10) For the purposes of subsection (9) above—

(a) “a partly matched distributable foreign profit” means a distributable foreign profit of the company part of which is not, at the material time, matched as mentioned in subsection (8) above, and

(b) “the unmatched part of the distributable foreign profit” shall be construed accordingly.

(11) For the purposes of this section—

(a) “the relevant period” shall be construed in accordance with section 246N(1);

(b) “the material time” means the time at which the claim mentioned in section 246N(7) is made.

(12) References in this section to matching shall be construed in accordance with sections 246J to 246M.

(13) Section 238(4) shall apply for the purposes of this section.