Paragraph 4

United Kingdom

(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

F1(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 F2and shall be taken to satisfy the conditions in paragraph 2(1A) above.

F3(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 taxF4 and—

(F5a)

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 F6Chapter 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 F7neither 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.

Annotations

Textual amendments

F1: Repealed by 1990 s.67(3)(a)and s.132and Sch.19 Part IVin relation to dividends paid on or after 20March 1990.
F2: Words in Sch. 25 para. 4(1) inserted (with application in accordance with s. 82(8) of the amending Act) by Finance Act 2001 (c. 9), s. 82(4)
F3: 1990 s.67(3)(c)in relation to dividends paid on or after 20March 1990.
F4: Words in Sch. 25 para. 4(1A) inserted (with application in accordance with s. 82(8) of the amending Act) by Finance Act 2001 (c. 9), s. 82(5)
F5: Sch. 25 para. 4(1A)(a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 287(4)(a) (with Sch. 2 Pts. 1, 2)
F6: Words in Sch. 25 para. 4(1A)(b) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 287(4)(b) (with Sch. 2 Pts. 1, 2)
F7: Words in Sch. 25 para. 4(2) inserted (with application in accordance with s. 82(8) of the amending Act) by Finance Act 2001 (c. 9), s. 82(6)

Notes on Schedule 25

Textual amendments

F1: Sch. 25 heading substituted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 25; S.I. 1998/3173, art. 2

Notes on Part I

Textual amendments

F1: Sch. 25 Pt. 1 (paras. 1-4A) omitted (with effect in accordance with Sch. 16 para. 6 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 16 para. 1(3) (with Sch. 16 paras. 7-9) (subject, as saved, to amendment by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 147(2) (with Sch. 2))