Taxation (International and Other Provisions) Act 2010 section 67

Restriction of relief if underlying tax at rate higher than rate of corporation tax

Section 67 restricts double taxation credit relief where an avoidance scheme has been used to inflate the amount of underlying tax that qualifies for relief, by capping the creditable tax at the UK corporation tax rate.

• Where a UK company claims credit relief for underlying tax on a dividend from an overseas company, and that underlying tax includes tax paid at a rate higher than the UK corporation tax rate, the relief may be restricted if an avoidance scheme is involved.
• The restriction applies whether the high-rate tax was paid by the overseas company that paid the dividend directly, or by a company further down a chain of dividend-paying companies.
• Where the restriction applies, the credit is calculated as if the overseas tax had been charged at the UK corporation tax rate in force when the dividend was paid (the "relievable rate"), rather than at the actual higher rate.
• Tax is considered to be at a "high rate" to the extent that the amount paid exceeds what would have been payable at the UK corporation tax rate on the same profits.