What does Schedule 9 paragraph 20 of the Taxation (International and Other Provisions) Act 2010 do?

Schedule 9 paragraph 20 modifies the definition of 'relevant profits' under section 59 for dividends paid before 1 July 2009. It removes subsections (2) and (3) of section 59 entirely and adjusts consequential cross-references in subsections (4) and (5), resulting in a simpler set of rules for calculating underlying tax credit relief on earlier dividends.

How are relevant profits determined for dividends paid before 1 July 2009 under United Kingdom law?

For dividends paid before 1 July 2009, the modified version of section 59 applies. Subsections (2) and (3) are disregarded entirely, so relevant profits are determined using only subsections (1), (4), and (5) as adjusted. This provides a more straightforward calculation compared to the full provisions that apply to later dividends.

What is the practical effect of removing subsections (2) and (3) of section 59 for pre-July 2009 dividends?

Removing subsections (2) and (3) means that additional conditions and categories for identifying relevant profits do not apply to earlier dividends. A UK company claiming underlying foreign tax credit on a pre-July 2009 dividend uses a narrower, simpler definition of relevant profits, potentially altering which profits qualify for the credit calculation.

Does the full version of section 59 apply to dividends paid on or after 1 July 2009?

Yes. For dividends paid on or after 1 July 2009, the full provisions of section 59 apply, including subsections (2) and (3). These additional subsections introduce further conditions and categories for determining relevant profits, potentially changing which overseas company profits are treated as relevant for the underlying tax credit calculation.

Taxation (International and Other Provisions) Act 2010 section 20

Meaning of "relevant profits" in section 58 [Schedule 9 paragraph 20]

Schedule 9 paragraph 20 modifies how "relevant profits" is defined under section 59 when dealing with dividends paid before 1 July 2009.

This paragraph applies transitional modifications to section 59, which defines "relevant profits" for the purposes of underlying tax credit calculations in section 58.
For dividends paid before 1 July 2009, subsections (2) and (3) of section 59 are removed entirely, meaning those rules do not apply to earlier dividends.
Consequential wording changes are made to subsections (4) and (5) of section 59 to remove cross-references to the now-omitted subsection (3).
The effect is that the definition of "relevant profits" for pre-July 2009 dividends follows a simpler, narrower set of rules than those applying to dividends paid on or after that date.

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