Mixing it

Mixing it

TERRY WAGGOTT provides a basic spreadsheet to facilitate eligible unrelieved foreign tax calculations.

THE EXTRA RELIEF that can be generated by making claims for eligible unrelieved foreign tax in onshore mixers is astonishing. Eligible unrelieved foreign tax pooling and surrenders can also prompt further tax planning since they can replace group relief, which in turn can invoke capital allowance disclaimers in other group companies.

But anyone attempting eligible unrelieved foreign tax calculations soon realises the need to ensure that they make sense. However, the explanations provided by, for example, the Inland Revenue website are plentiful, but are not always clear. (See www.inlandrevenue.gov.uk/manuals/intmanual/INTM164210.htm) Also, the commercial software is brilliant, but can be difficult to navigate without a good background knowledge of the subject and may not lend itself to tax planning scenarios. A simple way of facilitating tax planning and of checking that any calculations are valid is useful, regardless of whether they are prepared manually or by using commercial software.

For these reasons, I prepared Table 1 , which is a very basic spreadsheet based on the excellent article by David Blumenthal, 'The Four Step Solution' (see Taxation , 8 April 2004 at page 35).

Line 23 of Table 1 shows underlying tax pooled to eliminate the onshore mixer's United Kingdom tax liability. Lines 24 and 29 show the surrenders to other group companies. An explanation of the formulae used and notes to Table 1 are given below.

Table 1: Eligible unrelieved foreign tax in an onshore mixer

		Related low tax companies
A	B	C	D	E	F	G	H
5		Company 1	Company 2	Company 3	Company 2 + Company 3	Total	Company 1 Formulas
6		100%	100%	40%
7	Net	600,000	115,000	75,000	190,000	790,000	600,000
8	Withholding tax (WHT)	30,000			0	30,000	30,000
9	Underlying tax (ULT)	340,000	46,000		46,000	386,000	340,000
10	Less management expenses			(2,000)	(2,000)	(2,000)
11	"Gross"	970,000	161,000	73,000	234,000	1,204,000	=SUM(c7:c10)
12		38.14%	28.57%	0.00%	19.66%		=(+c8+c9)/c11
13
14	CT at 30%	291,000			70,200	361,200	=c11*0.3
15	DTR restricted - Note 1	291,000			46,000	337,000	=IF(c14<(c8+c9),c14,(c8+c9)) Issue: 3967 / Categories: Home > Mixing it Mixing it © Copyright LexisNexis 2024. All rights reserved. 21 July 2004 / Terry Waggott Mixing it TERRY WAGGOTT provides a basic spreadsheet to facilitate eligible unrelieved foreign tax calculations. THE EXTRA RELIEF that can be generated by making claims for eligible unrelieved foreign tax in onshore mixers is astonishing. Eligible unrelieved foreign tax pooling and surrenders can also prompt further tax planning since they can replace group relief, which in turn can invoke capital allowance disclaimers in other group companies. Mixing it TERRY WAGGOTT provides a basic spreadsheet to facilitate eligible unrelieved foreign tax calculations. THE EXTRA RELIEF that can be generated by making claims for eligible unrelieved foreign tax in onshore mixers is astonishing. Eligible unrelieved foreign tax pooling and surrenders can also prompt further tax planning since they can replace group relief, which in turn can invoke capital allowance disclaimers in other group companies. But anyone attempting eligible unrelieved foreign tax calculations soon realises the need to ensure that they make sense. However, the explanations provided by, for example, the Inland Revenue website are plentiful, but are not always clear. (See www.inlandrevenue.gov.uk/manuals/intmanual/INTM164210.htm) Also, the commercial software is brilliant, but can be difficult to navigate without a good background knowledge of the subject and may not lend itself to tax planning scenarios. A simple way of facilitating tax planning and of checking that any calculations are valid is useful, regardless of whether they are prepared manually or by using commercial software. For these reasons, I prepared Table 1 , which is a very basic spreadsheet based on the excellent article by David Blumenthal, 'The Four Step Solution' (see Taxation , 8 April 2004 at page 35). Line 23 of Table 1 shows underlying tax pooled to eliminate the onshore mixer's United Kingdom tax liability. Lines 24 and 29 show the surrenders to other group companies. An explanation of the formulae used and notes to Table 1 are given below. Table 1: Eligible unrelieved foreign tax in an onshore mixer   Related low tax companies   A B C D E F G H 5   Company 1 Company 2 Company 3 Company 2 + Company 3 Total Company 1 Formulas 6   100% 100% 40%       7 Net 600,000 115,000 75,000 190,000 790,000 600,000 8 Withholding tax (WHT) 30,000     0 30,000  30,000 9 Underlying tax (ULT) 340,000 46,000   46,000 386,000 340,000 10 Less management expenses     (2,000) (2,000) (2,000)   11 "Gross" 970,000 161,000 73,000 234,000 1,204,000 =SUM(c7:c10) 12   38.14% 28.57% 0.00% 19.66%   =(+c8+c9)/c11 13               14 CT at 30% 291,000     70,200 361,200 =c11*0.3 15 DTR restricted - Note 1 291,000     46,000 337,000 =IF(c14<(c8+c9),c14,(c8+c9)) Issue: 3967 Categories: SourceURL: Links: READERS' FORUM Read All Readers forum: Claiming pre-registration input tax Practice tip: 19 December 2024 New Queries: 19 December 2024 Readers’ forum: Should I advise my client to declare income? Readers’ forum: Pension scheme set up as discretionary trust? FIVE WAYS TO MAKE ACCOUNTS PRODUCTION AND TAX EASIER. Download the exclusive Xero free report here. New queries Please email any questions you might have to: taxation@lexisnexis.co.uk. NEWS Read All Automated tracking system for taxpayers could save £36m a year, study shows Welsh income tax rates are unchanged Business expenditure on R&D rises in 2023 HMRC targets landlords who may have undeclared rents Lump sums cannot be returned to pension scheme DEADLINE DATES Deadline dates for January 2025 CASES Read All No extenuating circumstances to extend deadline Delay in issuing penalties was no excuse for late return Sales of occupation income avoidance rules apply Whole of settlement was not subject to tax Payments were taxable as earnings Copyright © 2024 LexisNexis