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Onshore pooling |
See Also
DTR Calculations | DTR relief calculations | Foreign dividends
Select from the following headings:
Background | Developing the schedule | Completing the Schedule | Standard Sub-Schedules | Carry Forward | Related Errors
This schedule is used to plan onshore pooling of foreign dividends taxed at rates above and below the appropriate UK corporation tax rate. It should be used in conjunction with the onshore dividend mixing rules outlined in Finance Act 2000.
Onshore pooling
Finance Act 2000 allows limited pooling of foreign dividends that have been taxed at different rates to a companies UK rate, so as enable the company to partially offset surplus foreign tax on dividends from foreign subsidiaries taxed at greater than UK tax rate against additional UK tax on foreign subsidiaries taxed at lower than UK rates. Such relief is not available on tax rates above 45%. These rules apply to foreign dividends paid to UK companies on or after 31 March 2001.
Onshore pooling is achieved by offsetting certain surplus foreign tax (Eligible Unrelieved Foreign Tax, or EUFT) against Qualifying Foreign Dividends (QFDs).
EUFT
Two categories of EUFT are defined in legislation. Case A EUFT is generally brought about by unrelieved withholding tax. It is calculated as the lower of creditable underlying tax plus withholding tax and the full Schedule D V dividend taxed at 45%, less the full Schedule D V dividend taxed at the appropriate UK rate.
Case B EUFT is generally brought about by underlying tax. It is calculated as the lower of actual underlying tax and the full Schedule DV dividend taxed at 45%, less creditable underlying tax. Creditable underlying tax is the lower of actual underlying tax and the 30% 'mixer-cap' underlying rate.
QFDs
QFDs encompass most overseas dividends. Some notable exceptions include:
Where the user develops the Foreign dividends schedules from the Income sub-menu on the 'D' series of schedules, the software will simultaneously generate the Onshore pooling schedule. These will both be stored within the 'A' pack of schedules.
2009 onwards
From 2009 onwards, the nature of entries made in the Foreign dividends schedules will determine whether or not EUFT calculations will be carried out.
The user should first develop and complete Foreign dividends. The software will automatically load the totals from the relevant cells on the Foreign dividends schedules into the Onshore pooling schedule. The Foreign dividends schedules separate income according to whether this schedule defines them as related or unrelated.
The software will then allocate EUFT as best it can. The user should read the memorandum footnote, and follow the review guidelines, considering whether the allocation is appropriate, and consider whether unused double tax can be allocated against other sources of income, such as non-dividend income or non-qualifying dividends.
Utilising EUFT in other accounting periods or companies
The memorandum at the bottom of the schedule allows the user to allocate EUFT to other accounting periods or group companies under the provisions of ICTA 1988.
The schedule allows the user to enter the amounts of EUFT brought forward and brought back from the three subsequent years on a LIFO basis under ICTA 1988 s 806D(4) and TA 1988 s806D(5) respectively; again these data entry cells are separated according to whether the dividend income is related or unrelated. Against the same dividend streams, the user can also enter the amount of EUFT carried back under TA 1988 s806E or surrendered to group companies (TA 1988 s806H).
This schedule has no standard sub-schedules. The Foreign dividends schedule populates many of the cells on this schedule.
On carry forward, this schedule is automatically developed in the subsequent computation if it is present in the prior year computation. In the subsequent computation, the figures for underlying tax and withholding tax brought forward are entered automatically.
© 2009 Thomson Reuters.