Taxation (International and Other Provisions) Act 2010 section 66

Limitations on section 65(4)

Section 66 places restrictions on the types of tax that can be counted as underlying tax when looking at chains of companies paying dividends up to a UK parent company.

• When a UK-resident company in the chain pays a dividend, only corporation tax and any foreign tax for which it has already received credit relief can be taken into account as underlying tax.
• When an overseas company pays a dividend to another overseas company in the chain, the tax on that dividend can only be counted if it would have qualified for relief had the receiving company been UK-resident.
• These limitations prevent inappropriate taxes from being included when tracing underlying tax through a dividend-paying chain.
• The restrictions apply specifically to the extended relief for underlying tax paid by companies lower in a dividend-paying chain, as provided for under section 65(4).