Income and Corporation Taxes Act 1988

Group income U.K.

247 Dividends etc. paid by one member of a group to another. U.K.

(1) F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F2 (1A) A company falls within this subsection if—

(a) it is a 75 per cent. subsidiary of any other company, or

(b) arrangements of any kind (whether in writing or not) are in existence by virtue of which it could become such a subsidiary.]

(2) F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) M1 Where a company (“the recipient company”) receives from another company (“the payer company”), both being bodies corporate resident in the United Kingdom, any payments which are [F3 deductible payments in relation to the payer company for the purposes of corporation tax] and either—

[F4 (a) the payer company is—

(i) a 51 per cent. subsidiary of the other or of a company so resident of which the other is a 51 per cent. subsidiary, or

(ii) a trading or holding company which does not fall within subsection (1A) above and which is owned by a consortium the members of which include the recipient company, or]

(b) the recipient company is a 51 per cent. subsidiary of the payer company,

then, subject to the following provisions of this section, the recipient company and the payer company may jointly elect that this subsection shall apply to any such payments received from the payer company by the recipient company, and so long as the election is in force those payments may be made without deduction of income tax and neither section 349 nor section 350 shall apply thereto.

[F5 (4A) The reference in subsection (4) above to a payment which is a deductible payment in relation to a company for the purposes of corporation tax is a reference to any payment which is—

(a) a charge on income of that company for those purposes; or

(b) a payment of interest in relation to which a debit falls to be brought into account in the case of that company for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships).]

(5) [F6 Subsection (4) above shall not apply to payments] received by a company on any investments, if a profit on the sale of those investments would be treated as a trading receipt of that company F7 . . . .

[F8 (5A) F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F10 (5B) F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5C) F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5D) F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(6) M2 Where—

(a) F11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the payer company purports by virtue of an election under subsection (4) above to make any payment without deduction of income tax,

and F12 . . . income tax ought to have been deducted F12 . . . , the inspector may make such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) of the F12 . . . payer company and the F12 . . . recipient company are, so far as possible, the same as they would have been if F12 . . . the income tax had been duly deducted.

(7) Where tax assessed under subsection (6) above on the F13 . . . payer company is not paid by that company before the expiry of the period of three months from the date on which that tax is payable, that tax shall, without prejudice to the right to recover it from that company, be recoverable from the F13 . . . recipient company.

(8) M3 In determining for the purposes of this section whether one body corporate is a 51 per cent. subsidiary of another, that other shall be treated as not being the owner—

(a) of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom, or

(b) of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.

[F14 (8A) Notwithstanding that at any time a company (“the subsidiary company”) is a 51 per cent. subsidiary of another company (“the parent company”) it shall not be treated at that time as such a subsidiary for the purposes of this section unless, additionally, at that time—

(a) the parent company would be beneficially entitled to more than 50 per cent. of any profits available for distribution to equity holders of the subsidiary company; and

(b) the parent company would be beneficially entitled to more than 50 per cent. of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.]

(9) M4 For the purposes of this section—

(a) “trading or holding company” means a trading company or a company the business of which consists wholly or mainly in the holding of shares or securities of trading companies which are its 90 per cent. subsidiaries;

(b) “trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades; and

[F15 (c) a company is owned by a consortium if 75 per cent. or more of the ordinary share capital of the company is beneficially owned between them by companies resident in the United Kingdom of which none—

(i) beneficially owns less than 5 per cent. of that capital,

(ii) would be beneficially entitled to less than 5 per cent. of any profits available for distribution to equity holders of the company, or

(iii) would be beneficially entitled to less than 5 per cent. of any assets of the company available for distribution to its equity holders on a winding-up,

and those companies are called the members of the consortium.]

[F15 (9A) Schedule 18 shall apply for the purposes of subsections (8A) and (9)(c) above as it applies for the purposes of section 413(7).]

(10) M5 References in this section to F16 . . . payments received by a company apply to any received by another person on behalf of or in trust for the company, but not to any received by the company on behalf of or in trust for another person F16 . . . .

Textual Amendments

F1 S. 247(1)(2)(3) repealed (with effect in accordance with Sch. 3 para. 19(8) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 19(2), Sch. 27 Pt. 3(2), Note

F2 1989 s.99(3).

F3 Words in s. 247(4) substituted (with effect in accordance with s. 105(1) of the amending act) by Finance Act 1996 (c. 8), Sch. 14 para. 13(1) (with Sch. 15)

F4 S. 247(4)(a) substituted (with effect in accordance with Sch. 3 para. 19(8) of the amending Act) by Finance Act 1998 (c. 36), Sch. 3 para. 19(3)

F5 S. 247(4A) inserted (with effect in accordance with s. 105(1) of the amending act) by Finance Act 1996 (c. 8), Sch. 14 para. 13(2) (with Sch. 15)

F6 Words in s. 247(5) substituted (with effect in accordance with Sch. 3 para. 19(8) of the amending Act) by Finance Act 1998 (c. 36), Sch. 3 para. 19(4)(a)

F7 Words in s. 247(5) repealed (with effect in accordance with Sch. 3 para. 19(8) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 19(4)(b), Sch. 27 Pt. 3(2), Note

F8 S. 247(5A) inserted (3.5.1994) by Finance Act 1994 (c. 9), Sch. 16 para. 13

F9 S. 247(5A)-(5D) repealed (with effect in accordance with Sch. 6 para 4(2) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 4(1), Sch. 8 Pt. 2(11), Note

F10 S. 247(5B)-(5D) inserted (with effect in accordance with Sch. 7 para. 10(2) of the amending Act) by Finance Act 1997 (c. 16), Sch. 7 para. 10(1)

F11 S. 247(6)(a) repealed (with effect in accordance with Sch. 3 para. 19(8) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 19(5)(a), Sch. 27 Pt. 3(2), Note

F12 Words in s. 247(6) repealed (with effect in accordance with Sch. 3 para. 19(8) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 19(5)(b)-(f), Sch. 27 Pt. 3(2), Note

F13 Words in s. 247(7) repealed (with effect in accordance with Sch. 3 para. 19(8) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 19(6), Sch. 27 Pt. 3(2), Note

F14 1989 s.99(4)in relation to dividends etc. paid on or after 27July 1989.

F15 1989 s.99(5)(6)in relation to dividends etc. paid on or after 27July 1989.Previously

“(c) a company is owned by a consortium if three-quarters or more of the ordinary share capital of the company is beneficially owned between them by companies resident in the United Kingdom of which none beneficially owns less than one-twentieth of that capital, and those companies are called the members of the consortium.”

in subs. (9)(c).

F16 Words in s. 247(10) repealed (with effect in accordance with Sch. 3 para. 19(8) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 19(7), Sch. 27 Pt. 3(2), Note

Marginal Citations

M1 Source—1970 s.256(2)

M2 Source—1970 s.256(4), (4A); 1972 Sch.15 Pt.II

M3 Source—1970 s.256(5)

M4 Source—1970 s.256(6)

M5 Source—1970 s.256(7)

248 Provisions supplementary to section 247. U.K.

(1) M6 The Board may make regulations with respect to the procedure to be adopted for giving effect to section 247 and as to the information and evidence to be furnished by a company in connection with that section and, subject to the provisions of such regulations, an election under that section (“the election”) shall be made by notice to the inspector which shall set out the facts necessary to show that the companies are entitled to make the election.

(2) M7 The election shall not have effect in relation to F17 . . . payments paid less than three months after the giving of the notice and before the inspector is satisfied that the election is validly made, and has so notified the companies concerned; but shall be of no effect if within those three months the inspector notifies the companies concerned that the validity of the election is not established to his satisfaction.

(3) The companies concerned shall have the like right of appeal against any decision that the validity of the election is not established as the company paying the F17 . . . payments would have if it were an assessment made on that company, and Part V of the Management Act shall apply accordingly.

(4) M8 The election shall cease to be in force if at any time the companies cease to be entitled to make the election, and on that happening each company shall forthwith notify the inspector.

(5) Either of the companies making the election may at any time give the inspector notice revoking the election; and any such notice shall have effect from the time it is given.

(6) M9 The Board shall not make any regulations under subsection (1) above unless a draft of them has been laid before and approved by a resolution of the House of Commons.

Textual Amendments

F17 Words in s. 248(2)(3) repealed (with effect in accordance with Sch. 3 para. 20(3) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 20(2), Sch. 27 Pt. 3(2), Note

Marginal Citations

M6 Source—1972 s.91(3); 1970 s.257(1)

M7 Source—1970 s.257(2)

M8 Source—1970 s.257(3), (4)

M9 Source—1972 s.91(3)