Chapter INTM161120

Published date09 April 2016
Record NumberINTM161120
CourtHM Revenue & Customs

Certain exceptions to the source rule (INTM161110) are provided for by statute and under particular agreements as follows:

  1. Isle of Man and Channel Islands. TIOPA10/S9(7) provides that the limitation of unilateral relief to foreign tax on income arising in the foreign country is not to apply where the country concerned is the Isle of Man or any of the Channel Islands. Company dividends and debenture interest are excluded from the scope of the agreements with the Isle of Man (DT9950+), Guernsey (DT8600+) and Jersey (DT10750+) by the credit Articles of those agreements. Unilateral relief is therefore available for Manx and Channel Islands tax on debenture interest and on company dividends wherever such income arises, except where the recipient is a portfolio shareholder (see INTM164010 paragraph (f). See also DT8606, DT9955 and DT10755. The rule that a claimant must also be a resident in the UK is also subject to modification (see INTM161200 paragraph (a)).
  2. Foreign Dividends. TIOPA10/S63 provides that where a UK company controls, or is a subsidiary of a company which controls, not less than 10% of the voting power in a foreign company, any UK or `third’ country tax paid on its profits by that foreign company can be taken into account as underlying tax (INTM164010 paragraph (d) for the purpose of allowing credit to the UK company in respect of dividends received from the foreign company (see INTM167370).
  3. Profits, Income and Capital Gains. Many agreements lay down specific rules for determining the source of income, profits or capital gains for tax credit relief purposes. The provision which is most often used in the credit Article says that, for the purposes of giving tax credit relief, profits, income or capital gains earned by a resident of one country which may be taxed in the other country in accordance with the provisions of the agreement are to be deemed to arise from sources in that other country. The interest, royalties and technical fees Articles...

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