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TIOPA10/S14 also provides that a company is entitled to tax credit relief for underlying tax if it is a subsidiary of a company controlling not less than 10 per cent of the voting power in the company paying the dividend. TIOPA10/S63 (6) defines a subsidiary as a company in which not less than 50 per cent of the voting power is controlled by the other company.

»Ê¹ÚÌåÓýapp following examples illustrate the effect of this definition on claims to relief for underlying tax. Companies X and Y are UK companies and company A is the foreign company paying the dividend.

Example 1

Y is a subsidiary of X. Since X controls 10 per cent of the voting power in A, Y is also treated as having 10 per cent control of the voting power in A, plus its direct 1 per cent control. Both X and Y will get relief for the underlying tax attributable to A’s dividends.

Example 2

Y is a subsidiary of X. X controls directly 6 per cent of the voting power in A, and indirectly a further 6 per cent through Y. X has therefore direct and indirect control of 12 per cent of the voting power in A and Y is also treated as having 12 per cent of the voting power in A. Both X and Y will get relief for the underlying tax attributable to A’s dividends.