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This section was repealed by FA 2009 s 36 and Sch 16 para 2 in relation to accounting periods of controlled foreign companies beginning on or after 1 July 2009

Example to show how ICTA88/S801C works

UK has a subsidiary A in country A that in turn holds three subsidiaries:

B pays a dividend to A of 85 in respect of which it has paid underlying tax of 15;

C pays a dividend to A of 100 in respect of which there is nil underlying tax but 10 with-holding tax is payable;

D pays a dividend to A of 60 in respect of which it has suffered underlying tax of 40.

A then pays a dividend of 235 up to the UK.

1. For B to satisfy an ADP, A will have to specify that 85 of the subsequent dividend of 235 is paid wholly out of the initial dividend received from B. Only the foreign tax paid in relation to that initial dividend can be set off against any UK tax payable on that part of the subsequent dividend of 235 paid by A to the UK.
2. The remaining 150 (90 + 60) will be the 鈥榬esidual dividend鈥� and only the foreign tax paid on that can be set off against any UK tax payable on that part of the dividend of 235 paid by A to the UK.
3. The mixer cap will also restrict the underlying tax creditable on the residual dividend as that paid by D exceeds 30%. The 鈥榬esidual dividend鈥� will count as a 鈥榪ualifying foreign dividend鈥� so the capped tax can be pooled as EUFT - but not set against the UK tax on the ADP dividend or the residual dividend.

Case V Computation:

ADP dividend	85	Residual dividend	150
Underlying tax	15	Underlying tax (10+ 40)	50
Gross dividend	100	Gross dividend	200
CT	30	CT @ 30%	60
DTR	(15)	DTR (10 + 30)	(40)
Net UK tax	15	Net UK tax	20
-	EUFT = 10	-	听