Income and Corporation Taxes Act 1988

123 Foreign dividends. U.K.

M1 (1) In this section—

(a) “foreign dividends” means any interest, dividends or other annual payments payable out of or in respect of the stocks, funds, shares or securities of any body of persons not resident in the United Kingdom (but not including any such payment to which section 348 or 349(1) applies) and references to dividends shall be construed accordingly;

(b) “relevant foreign dividends” means foreign dividends payable out of or in respect of stocks, funds, shares or securities which are not held in a recognised clearing system;

(c) “banker” includes a person acting as a banker; and

(d) references to coupons include, in relation to any dividends, warrants for or bills of exchange purporting to be drawn or made in payment of those dividends.

(2) Where relevant foreign dividends are entrusted to any person in the United Kingdom for payment to any persons in the United Kingdom [F1 they shall be chargeable to income tax under Schedule D].

(3) Where—

(a) a banker or any other person in the United Kingdom, by means of coupons received from any other person or otherwise on his behalf, obtains payment of any foreign dividends [F2 and either—

(i) the payment of those dividends was not entrusted to any person in the United Kingdom, or

(ii) the stocks, funds, shares or securities in respect of which those dividends are paid are held in a recognised clearing system,] or

(b) any banker in the United Kingdom sells or otherwise realises coupons for foreign dividends, and pays over the proceeds to any person or carries them to his account, or

(c) any dealer in coupons in the United Kingdom purchases any such coupons otherwise than from a banker or another dealer in coupons,

tax under Schedule D shall extend, in the cases mentioned in paragraph (a) above, to the dividends, and, in the cases mentioned in paragraphs (b) and (c) above, to the proceeds of the sale or other realisation, F3 . . ..

[F4 (3A) Parts III and IV of Schedule 3 shall have effect in relation to tax chargeable by virtue of subsection (2) or (3) above.]

(4) In the cases mentioned in subsections (2) and (3) above, no tax shall be chargeable if it is proved, on a claim in that behalf made to the Board, that the person owning the stocks, funds, shares or securities and entitled to the dividends or proceeds is not resident in the United Kingdom.

(5) Where stocks, funds, shares or securities are held under a trust, and the person who is the beneficiary in possession under the trust is the sole beneficiary in possession and can, by means either of the revocation of the trust or the exercise of any power under the trust, call upon the trustees at any time to transfer the stocks, funds, shares or securities to him absolutely free from the trust, that person shall, for the purposes of subsection (4) above, be deemed to be the person owning the stocks, funds, shares or securities.

(6) Where any income of any person is by virtue of any provision of the Tax Acts (and in particular, but without prejudice to the generality of the preceding words, Chapter III of Part XVII) to be deemed to be income of any other person, that income is not exempt from tax by virtue of subsection (4) above by reason of the first mentioned person not being resident in the United Kingdom.

[F5 (7) In a case where—

(a) relevant foreign dividends referred to in subsection (2) above are dividends (as opposed to interest or other annual payments),

(b) they are entrusted by a company which at the time they are entrusted (the relevant time) is not resident in the United Kingdom,

(c) they are entrusted for payment to a company which at the relevant time is resident in the United Kingdom,

(d) at the relevant time the company mentioned in paragraph (c) above directly or indirectly controls not less than 10 per cent. of the voting power in the company mentioned in paragraph (b) above, and

(e) the relevant time falls on or after 1st January 1992,

subsection (2) above shall not apply.

F5 (8) In a case where—

(a) foreign dividends referred to in subsection (3)(a) above are dividends (as opposed to interest or other annual payments),

(b) they are paid by a company which at the time of the payment (the relevant time) is not resident in the United Kingdom,

(c) payment is obtained on behalf of a company which at the relevant time is resident in the United Kingdom,

(d) at the relevant time the company mentioned in paragraph (c) above directly or indirectly controls not less than 10 per cent. of the voting power in the company mentioned in paragraph (b) above, and

(e) the relevant time falls on or after 1st January 1992,

subsection (3) above shall not apply.]

Textual Amendments

F1 Words in s. 123(2) substituted (16.7.1992 with effect in relation to transactions effected on or after 1.10.1992) by Finance (No. 2) Act 1992 (c. 48), s. 63, Sch. 11 paras. 1(2), 6.

F2 1988(F) s.76(3)in respect of payments obtained on or after 29July 1988.Previously

“elsewhere than in the United Kingdom”.

F3 Words in s. 123(3) repealed (16.7.1992 with effect in relation to transactions effected on or after 1.10.1992) by Finance (No. 2) Act 1992 (c. 48), ss. 63, 82, Sch. 11 paras. 1(3), 6, Sch. 18 Pt.VII.

F4 S. 123(3A) inserted (16.7.1992 with effect in relation to transactions effected on or after 1.10.1992) by Finance (No. 2) Act 1992 (c. 48), s. 63, Sch. 11 paras. 1(4), 6.

F5 S. 123(7)(8) inserted (16.7.1992) by Finance (No. 2) Act 1992 (c. 48), s.30.

Modifications etc. (not altering text)

C1 See 1989 s.94and Sch.11 para.18—deep gain securities.

C2 S. 123(2)(3) applied (1.10.1993) by S.I. 1993/2004, regs. 12(2)(a), 13(2)(a)

Marginal Citations

M1 Source—1970 s.159; 1986 s.48(2)-(5)