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The exempt distribution regime broadly provides that most dividends received by a UK company (from the UK or overseas) will be exempt from corporation tax (see Division D5.1). The provisions discussed in this article apply to overseas dividends that are not exempt.

The mixer cap aim is to limit offshore mixing by imposing restrictions on the availability of underlying tax relief.

The restrictions on underlying tax are calculated by applying the mixer cap which ensures that the creditable underlying tax on any dividend does not exceed a maximum amount given by the following formula¹:

where:

1. Ìý

   ÌýÌýÌýÌý D is the amount of the dividend

2. Ìý

   ÌýÌýÌýÌý PA is the actual underlying tax properly attributable to the dividend

3. Ìý

   ÌýÌýÌýÌý M is the average rate of corporation tax applicable to the profits of the accounting period in which the dividend is received.

This formula applies to dividends paid by companies resident outside the UK to companies resident in the UK. When making a claim for double tax relief it is