Income and Corporation Taxes Act 1988

[F1 806B The amounts that are eligible unrelieved foreign tax. U.K.

(1) This section has effect for determining the amounts of eligible unrelieved foreign tax which arise in the cases set out in section 806A(4) and (5).

(2) In Case A, the difference between—

(a) the amount of the credit allowed as mentioned in section 806A(4)(b), and

(b) the greater amount of the credit that would have been so allowed if, for the purposes of subsection (2) of section 797, the rate of corporation tax payable as mentioned in that subsection were the upper percentage,

shall be an amount of eligible unrelieved foreign tax.]

[F2 (3) In Case B, the amount (if any) by which—

(a) the aggregate of the upper rate amounts falling to be brought into account for the purposes of this paragraph by virtue of subsection (4) or (5) below, exceeds

(b) the amount of tax to be taken into account as mentioned in section 799(1) in the case of the [F3 dividend falling within section 806A(2)], before any increase under section 801(4B),

shall be an amount of eligible unrelieved foreign tax.

(4) In the case of the [F3 dividend falling within section 806A(2)] (but not any lower level dividend), the upper rate amount to be brought into account for the purposes of subsection (3)(a) above—

(a) in a case where the mixer cap does not restrict the amount of tax to be taken into account as mentioned in section 799(1) (before any increase under section 801(4B)) in the case of that dividend, is that amount of tax; or

(b) in a case where the mixer cap restricts the amount of tax to be so taken into account in the case of that dividend, is the greater amount that would have been so taken into account if, in the application of the formula in section 799(1A) in the case of that dividend (but not any lower level dividend) M% had, in relation to—

(i) so much of D as does not represent any lower level dividend, and

(ii) so much of U as is not underlying tax attributable to any lower level dividend,

been the upper percentage.

(5) In the case of any dividend (the “relevant dividend”) received as mentioned in subsection (2) or (3) of section 801 which is a lower level dividend in relation to the [F3 dividend falling within section 806A(2)], the upper rate amount to be brought into account for the purposes of subsection (3)(a) above—

(a) in a case where the mixer cap does not restrict the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of the relevant dividend, is the appropriate portion of that amount of underlying tax;

(b) in a case where—

(i) the relevant dividend was paid by a company resident in the United Kingdom, and

(ii) the mixer cap restricts the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of that dividend,

is the appropriate portion of that restricted amount of underlying tax; or

(c) in a case where—

(i) the relevant dividend was paid by a company resident outside the United Kingdom, and

(ii) the mixer cap restricts the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of that dividend,

is the appropriate portion of the greater amount of tax that would have been so treated if, in the application of the formula in section 799(1A) in the case of that dividend (but not any other dividend) M% had, in relation to so much of D as does not represent any lower level dividend, and so much of U as is not underlying tax attributable to any lower level dividend, been the upper percentage.

(6) For the purposes of subsection (5) above, the “appropriate portion” of any amount there mentioned in the case of a dividend is found by multiplying that amount by the product of the reducing fractions for each of the higher level dividends.]

(7) For the purposes of subsection (6) above, the “reducing fraction” for any dividend is the fraction—

(a) whose numerator is the amount of the dividend; and

(b) whose denominator is the amount of the relevant profits (within the meaning of section 799(1)) out of which the dividend is paid.

(8) Any reference in this section to any tax being restricted by the mixer cap in the case of any dividend is a reference to that tax being so restricted otherwise than by virtue only of the application of the mixer cap in the case of one or more lower level dividends.

(9) For the purpose of determining the amount described in subsection (2)(b), [F4 (4)(b) or (5)(c)] above, sections 806C and 806D shall be disregarded.

(10) In this section—

• F5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “higher level dividend”, in relation to another dividend, means any dividend—

  (a)

  by which that other dividend is to any extent represented; and

  (b)

  [F6 which either is the dividend falling within section 806A(2) or is to any extent represented by that dividend;]

• “lower level dividend”, in relation to another dividend, means any dividend which—

  (a)

  is received as mentioned in section 801(2) or (3); and

  (b)

  is to any extent represented by that other dividend;

• “the relevant tax” means—

  (a)

  in the case of the [F7 dividend falling within section 806A(2)], the foreign tax to be taken into account as mentioned in section 799(1); and

  (b)

  in the case of any other dividend, the amount of underlying tax to be treated as mentioned in section 801(2) or (3) in the case of the dividend.

Textual Amendments

F1 Ss. 806A-806H, 806J and cross-heading inserted (with effect in accordance with Sch. 30 para. 21(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 21(1)

F2 S. 806B(3)-(6) substituted (with effect in accordance with Sch. 27 para. 5(4) of the amending Act) by Finance Act 2001 (c. 9), Sch. 27 para. 5(2)

F3 Words in s. 806B(3)(4)(5) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 253(2) (with Sch. 2 Pts. 1, 2)

F4 Words in s. 806B(9) substituted (with effect in accordance with Sch. 27 para. 5(4) of the amending Act) by Finance Act 2001 (c. 9), Sch. 27 para. 5(3)

F5 S. 806B(10): definition of "the Case V dividend" repealed (1.4.2009 with effect in accordance with s. 1329(1) of the repealing Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 253(3)(a), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F6 S. 806B(10): in definition of "higher level dividend", para. (b) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 253(3)(b) (with Sch. 2 Pts. 1, 2)

F7 S. 806B(10): in definition of "the relevant tax", words in para. (a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 253(3)(c) (with Sch. 2 Pts. 1, 2)