Finance Act 1966

5 (1) Where dividends received by a company which is a member of a group in the year 1965-66 include dividends from a member of the same group of companies, and that member pays in the year a gross amount of dividends which exceeds its standard amount, then there shall be excluded from the dividends taken into account under subsection (6)(d) of the said section 85 (which fixes the amount of the tax ultimately borne by the company) a part of the dividends received from that member which bears to the whole the same proportion as the excess bears to all the dividends paid by that member in the year 1965-66.

(2) Any amount of a dividend paid by a member of a group of companies excluded under sub-paragraph (1) above shall, for the purposes of the said subsection (6)(d) as it applies to that member, be treated as if it had not been paid.

(3) Sub-paragraph (1) above shall not apply unless the gross amount of dividends received by the company in the year 1965-66 from members of the same group of companies exceeds one-third of the gross amount of the dividends received by the company in its standard period from companies then being members of the same group of companies (or, if the standard period is less than three years, an amount bearing to the dividends last-mentioned the same proportion as one year bears to the standard period), and where any dividends would fall to be excluded under sub-paragraph (1) above the company may elect that the exclusion shall be of such part of the dividends received from members of the same group as is equal to the excess referred to in this sub-paragraph:

Provided that this sub-paragraph shall not apply where, because the company commenced to carry on business at a time later than the beginning of December 1964, or for any other reason, the company has no standard period.

(4) Where the company exercises the right of election under sub-paragraph (3) above, sub-paragraph (2) above shall have effect as if the amount out of the dividends paid by any other member of the group of companies excluded under sub-paragraph (1) above were the proportion of the excess referred to in sub-paragraph (3) above which is the same as the proportion which—

(a) the amount of the dividends paid to the company by that member in the year 1965-66 bears

(b) to the aggregate of the amount of the dividends paid to the company in that year by all members of the group.

(5) This paragraph shall be construed in accordance with section 83 of the [1965 c. 25.] Finance Act 1965.