»Ê¹ÚÌåÓýapp

ICTA88/SCH26/PARA6

To the extent that tax paid under Chapter IV has been relieved under ICTA88/SCH26/PARA3 (relief on capital gains, see INTM256220) it has to be excluded from the ‘gross attributed tax� qualifying for relief under ICTA88/SCH26/PARA4(2). This restriction applies where

1. any sum forming part of the ‘gross attributed tax� in relation to a dividend paid by a controlled foreign company has been allowed as a deduction on a disposal of shares in any company, and
2. a person receiving a dividend (‘the primary dividend�) in respect of the shares disposed of is entitled to relief under ICTA88/SCH26/PARA4(2) in respect of all or any of the “gross attributed tax�.

In cases where (a) and (b) above apply, the relief under ICTA88/SCH26/PARA4(2) is reduced by the amount of the deduction allowed under ICTA88/SCH26/PARA3.

»Ê¹ÚÌåÓýapp restriction as described above is not, however, adequate to deal with the case where, for example, a United Kingdom company disposes of its shares in a controlled foreign company to a non-resident subsidiary. In these circumstances relief is potentially available twice in respect of the same amount of tax: first, as a capital gains deduction on disposal of the shares in the controlled foreign company, and second, as ‘gross attributed taxâ€� if following the disposal the controlled foreign company’s profits are remitted by way of indirect dividend to the United Kingdom. »Ê¹ÚÌåÓýapp restriction as described above would not apply in these circumstances because the dividend received by the United Kingdom company is in respect of the shares in the non-resident subsidiary which acquired the interest in the controlled foreign company. »Ê¹ÚÌåÓýapp dividend is not in respect of the shares disposed of.

»Ê¹ÚÌåÓýapp restriction is therefore extended to cover the case where a United Kingdom resident receives any ‘relevant dividendâ€�. A ‘relevant dividendâ€� is a dividend in respect of shares in a non-resident company which reflects a dividend paid in respect of the shares the disposal of which established the entitlement to capital gains relief under ICTA88/SCH26/PARA3.