The exempt distribution regime broadly provides that most dividends received by a UK company (from the UK or overseas) will be exempt from corporation tax (see Division D5.1). The provisions discussed in this article apply to overseas dividends that are not exempt.
Foreign taxation of a group as a single entity
In some countries, eg the US and the Netherlands, groups of companies may pay tax on a consolidated basis. Companies in a tax consolidation are treated as a single entity for double taxation relief purposes1.
In calculating relevant profits and underlying tax rates, all relevant profits and losses of the individual companies for the year are aggregated and taken as the relevant profits of the single entity. The taxes paid both at group and individual company levels are aggregated and taken as the tax paid on the single entity's profits. This results in a group underlying tax rate for an accounting period which applies to the relevant profits of each individual company in the group.
Example 1
A UK parent company owns
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