Foreign profits exemption for UK holding companies

Under the new exemption regime for foreign profits, all dividends and distributions by UK resident and overseas companies to a UK holding company will be exempt if they fall into the following categories:

  1. Distributions from controlled companies;
  2. Distributions in respect of non-redeemable ordinary shares;
  3. Distributions in respect of portfolio holdings;
  4. Dividends derived from transactions not designed to reduce tax; and
  5. Dividends in respect of shares accounted for as liabilities.

However, dividends or other distributions are not exempt if they are of a capital nature.  

With five separate categories it appears at first glance the UK distribution exemption is more complicated than those of other major EU countries but the UK government anticipates that most distributions will fall under the controlled companies or non-redeemable ordinary share classes, thus greatly simplifying the possibilities.  For a comparative study of the exemption regimes of major EU jurisdictions please read the articles below.