Taxation (International and Other Provisions) Act 2010 section 65

Relief for underlying tax paid by company lower in dividend-paying chain

Section 65 allows tax paid by a company further down a chain of dividend-paying overseas companies to be treated as underlying tax of the company immediately above it in the chain, so that a UK company at the top of the chain can claim credit relief for that tax.

• Where dividends flow up a chain of companies to a UK recipient, underlying tax paid by a lower company in the chain can be treated as tax paid by the company directly above it, enabling credit relief to cascade upwards through multiple tiers.
• This relief applies where the lower company's tax would have qualified for credit relief had the dividend been paid directly from a non-UK company to a UK company, and had double taxation arrangements covered the underlying tax.
• For the purpose of testing whether this relief is available, the minimum 10% voting power requirement is extended to include holding at least 10% of the ordinary share capital as an alternative qualifying condition.
• The method for calculating the underlying tax to be taken into account depends on whether the first company in the chain is UK-resident and whether the paying and receiving companies within the chain are resident in the same territory.