# Income and Corporation Taxes Act 1988, Paragraph 4

Extent: E+W+S+N.I.

(1) For the purposes of this Part of this Schedule, where—
(a) a controlled foreign company pays a dividend (“the initial dividend”) to another company which is also not resident in the United Kingdom, and
(b) that other company or another company which is related to it pays a dividend (“the subsequent dividend”) to a United Kingdom resident, and
(c) the subsequent dividend is paid at a time when the company paying it is not resident in the United Kingdom; and
(d) the subsequent dividend is paid out of profits which are derived, directly or indirectly, from the whole or part of the initial dividend,
so much of the initial dividend as is represented by the subsequent dividend shall be regarded as paid to the United Kingdom resident and shall be taken to satisfy the conditions in paragraph 2(1A) above.
(1A) A payment to a company shall not be a subsequent dividend within the meaning of sub-paragraph (1)(b) above unless it is taken into account in computing the company’s income for corporation tax and—
(a) it is chargeable neither under Chapter 2 of Part 3 of CTA 2009 as profits of a trade carried on wholly or partly in the United Kingdom nor under section 436A (gross roll-up business: separate charge on profits); or
(b) if it is chargeable under Chapter 2 of Part 3 of CTA 2009 as profits of a trade carried on wholly or partly in the United Kingdom, or under section 436A, it is not involved in a UK tax avoidance scheme;
and paragraph 4A below has effect for the purposes of paragraph (b) above.
(2) For the purposes of this paragraph, one company is related to another if neither is resident in the United Kingdom and the other—
(a) controls directly or indirectly, or
(b) is a subsidiary of a company which controls directly or indirectly,
at least 10 per cent. of the voting power in the first-mentioned company; and where one company is so related to another and that other is so related to a third company, the first company is for the purposes of this paragraph related to the third, and so on where there is a chain of companies, each of which is related to the next.

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Source: https://www.legislation.gov.uk/ukpga/1988/1/schedule/25/paragraph/4 (the official version)
Page: https://openlegislation.uk/income-and-corporation-taxes-act-1988/schedule-25/paragraph-4
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.