Section 70 | Underlying tax reflecting interest on loans

(1)Subsection (2) applies if—

(a)a bank, or a company connected with a bank, makes a claim for an allowance by way of credit in accordance with this Chapter,

(b)there is a dividend-paying chain (see section 64) in which—

(i)the first company is the claimant, and

(ii)the second company is a company resident outside the United Kingdom,

(c)the claimant—

(i)controls directly or indirectly, or

(ii)is a subsidiary of a company which controls directly or indirectly,

at least 10% of the voting power in the second company,

(d)the claim relates to underlying tax on a dividend paid by the second company,

(e)that underlying tax is, or includes, tax payable under the law of a territory outside the United Kingdom on, or by reference to, interest or dividends earned or received in the course of its business by a company (“the receiving company”) which is—

(i)the second company, or

(ii)a company lower in the chain than the second company, and

(f)section 44 would have applied to the receiving company had it been resident in the United Kingdom.

(2)The amount of the credit for the tax mentioned in subsection (1)(e) (“the non-UK tax”) is not to exceed the sum equal to corporation tax, at the rate in force at the time the non-UK tax was chargeable, on—

(3)For the purposes of subsection (1)(a)—

(a)“bank” means a company carrying on, in the United Kingdom or elsewhere, any trade which includes the receipt of interest or dividends, and

(b)whether a company is connected with a bank is determined in accordance with section 1122 of CTA 2010.

(4)For the purposes of subsection (1)(c), the claimant is a subsidiary of another company (“P”) if P controls, directly or indirectly, at least 50% of the voting power in the claimant.