Income and Corporation Taxes Act 1988

233 Taxation of certain recipients of distributions and in respect of non-qualifying distributions

(1) Where in any year of assessment the income of any person, not being a company resident in the United Kingdom, includes a distribution in respect of which that person is not entitled to a tax credit—

(a) no assessment shall be made on that person in respect of income tax at the basic rate on the amount or value of the distribution;

(b) that person’s liability under any assessment made in respect of income tax at a higher rate on the amount or value of the distribution or on any part of the distribution shall be reduced by a sum equal to income tax at the basic rate on so much of the distribution as is assessed at that higher rate;

(c) the amount or value of the distribution shall be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax.

(2) Where a person has paid tax (“the tax paid”) in respect of excess liability on, or on any part of, a non-qualifying distribution, then if, apart from this subsection, he would be liable to pay an amount of tax in respect of excess liability on, or on any part of, a repayment of the share capital or of the principal of the security which constituted that non-qualifying distribution, he shall be so liable only to the extent (if any) to which that amount exceeds the amount of the tax paid.

In this subsection—

• “excess liability” means the excess of liability to income tax over what it would be if all income tax were charged at the basic rate to the exclusion of any higher rate;

• “non-qualifying distribution” means a distribution which is not a qualifying distribution.