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Hello,
Im facing a problem and was wondering if anyone here can help me,
till half hour ago i thought franked investment income comprises of dividends from both uk and overseas companies(resident and non uk residents)
but in a question i tried to attempt(BPP Practice and Revision Kit question 32 – Crash Bash Ltd) they have only included divided from uk company and ignored one from overseas 100% subsidiary ??
does it mean that the dividend from an overseas subsidiary(resident overseas) not form part of franked investment income ?You are partly right, franked investment income (FII) is indeed the gross equivalent of dividends received from both UK and overseas resident companies BUT excludes dividends from associated companies. Therefore if the dividend had been received from either an overseas or UK resident subsidiary it would NOT have been included as FII. Hope this helps.
I believe it has more to do with ownership….
If the UK company has > 50% ownership of the overseas , the overseas company will be treated as an associate company. Therefore cash dividends received are not group income and not treated as FII.
On the other hand, if the overseas company is controlled less than fifty percent by the the UK company, cash dividends received are treated in the same way as UK dividend and are grossed up 100/90 as FII.
I hope this works too.As I said dividends received from ASSOCIATED companies whether UK or overseas resident are NOT included as FII
@ kreggie: i think, ASSOCIATE’s are where the parent company has less than 50% ownership and greater than 20% ownership of shares .
tutor
so can subsidiary companies divident be considered as FII?NO Sabrin you are confusing Tax and Financial Reporting definitions!! In Corporate Tax companies are associated when either one company controls another, or two or more companies are under common control. This is therefore usually in a group situation meaning that a parent company and its subsidiaries are associated. Dividends from subsidiaries are NOT included in FII. Please look in Course Notes
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