GIM12140 - Double taxation relief: underlying tax on dividends referable to an overseas branch: accounting periods beginning before 1 April 2000: restriction of credit under section 802 ICTA 1988: example
- A United Kingdom insurance company transacting general business carries on that business through branches in countries A and B. It is charged to tax under Case I of Schedule D in respect of its general insurance business. The total investment income referable to the company鈥檚 general business (including franked investment income and group income) is 拢4,000,000 which includes overseas dividends as follows:
- 拢900,000 from companies resident in country A (of which 拢600,000 comes from a company in which the United Kingdom company controls 25 per cent of the voting power).
- 拢500,000 from companies resident in country B.
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The 鈥渞elevant fractions鈥� are
- Country A 1/4
- Country B 1/10
Dividends from companies in country A
Limit on amount of dividends available for relief under Section 802
Relevant fraction of total investment income (录 脳 拢4,000,000) = 拢1,000,000
Less dividends qualifying for underlying tax relief apart from Section 802 = 拢600,000
Limit on dividends available for relief under Section 802 is therefore 拢400,000
As this exceeds 拢300,000 (拢900,000 less 拢600,000) there is no limitation.
Dividends from companies in country B
Limit on amount of dividends available for relief under Section 802:
Relevant fraction of total investment income (1/10 脳 拢4,000,000) = 拢400,000
As this is less than the amount of 拢500,000, the relief is limited to dividends totalling 拢400,000.