Income and Corporation Taxes Act 1988

235 Distributions of exempt funds etc. U.K.

M1 (1) Where a person entitled to a tax credit in respect of a distribution to which this section applies is, by reason of any exemption from tax, entitled to recover tax and his holding (together with any associated holding) of any one class of the shares, securities or rights by virtue of which he is entitled to the distribution amounts to not less than 10 per cent. thereof, subsection (3) below shall apply to the income represented by any part of the distribution which is not a part—

(a) to which profits arising after the date of acquisition are attributable in accordance with section 236; or

(b) in relation to which the date of acquisition is earlier than 6th April 1965.

(2) For the purposes of this section and section 236, the date of acquisition, in relation to any part of a distribution or profits attributable to it, is the date on which the shares, securities or rights by virtue of which a person is entitled to that part were acquired by him.

(3) Where this subsection applies to any income—

(a) the exemption from tax shall not extend to that income; and

(b) it shall be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax; and

(c) no amount of interest shall be deducted from or set off against it under section 353.

(4) Where, by virtue of this section, an exemption from tax does not apply to any income represented by a distribution or part of a distribution, the person entitled to the income shall be liable to tax or, as the case may be, additional tax, on it at a rate equal to [F1 the difference according to the rates in force at the time the distribution is made between the lower rate and the rate applicable to trusts] and shall be assessable to income tax or corporation tax accordingly.

(5) This section applies to any qualifying distribution except any amount which is treated as such in accordance with section 209(3) or sections 210 and 211.

Textual Amendments

F1 Words in s. 235(4) substituted (27.7.1993 with effect for the year 1993-94 and subsequent years of assessment) by 1993 c. 34, s. 79, Sch. 6 paras.3, 25(1)

Marginal Citations

M1 Source—1973 s.22