Finance Act 1998

106 Underlying tax reflecting interest or dividends. U.K.

(1) Section 803 of the Taxes Act 1988 (underlying tax reflecting interest on loans) shall be amended as follows.

(2) In subsection (1)—

(a) in paragraph (b), after the words “a dividend" there shall be inserted the words “ (“the overseas dividend") ”;

(b) in paragraph (c), for the words “interest on a loan made" there shall be substituted the words “ interest or dividends earned or received ”; and

(c) for paragraph (d) there shall be substituted the following paragraph—

“(d) if the company which received the interest or dividends (“the company") had been resident in the United Kingdom, section 798 would apply in relation to that company.”

(3) In subsection (3), for the words from “on so much" to the end there shall be substituted the words “ on so much of the interest or dividends as exceeds the amount of the company’s relevant expenditure which is properly attributable to the earning of the interest or dividends ”.

(4) In subsection (4)—

(a) in paragraph (a), for the words “section 798(2)" there shall be substituted the words “ section 798(3) ”;

(b) for paragraph (b) there shall be substituted the following paragraph—

“(b) “the company"s relevant expenditure’ means the amount which, if the company referred to in subsection (1)(d) above were resident in the United Kingdom and were a qualifying taxpayer for the purposes of section 798, would be its financial expenditure in relation to the earning of the interest or dividends, as determined in accordance with section 798B.”

(5) In subsection (5)—

(a) for the words “the dividend", in both places where they occur, there shall be substituted the words “ the overseas dividend ”; and

(b) for the words “the interest" there shall be substituted the words “ the interest or dividends ”.

(6) In subsection (6)—

(a) for the words “the dividend" there shall be substituted the words “ the overseas dividend ”; and

(b) for the words “the permitted amount" there shall be substituted the following paragraphs—

“(a) the amount of the spared tax which under any arrangements is to be taken into account for the purpose of allowing credit against corporation tax in respect of the overseas dividend; or

(b) if it is less, 15 per cent. of the interest or dividends;”.

(7) For subsection (7) there shall be substituted the following subsection—

“(7) In this section “spared tax” has the same meaning as in section 798A.”

(8) In subsection (8)—

(a) after the words “amount of tax which" there shall be inserted the words “ is referable to interest and ”; and

(b) for the words “the dividend" there shall be substituted the words “ the overseas dividend ”.

(9) In subsection (9)—

(a) for the words “the interest", in both places where they occur, there shall be substituted the words “ the interest or dividends ”; and

(b) for the words “the dividend" there shall be substituted the words “ the overseas dividend ”.

(10) For subsections (10) and (11) there shall be substituted the following subsection—

“(10) In subsection (1) above “bank” means a company carrying on, in the United Kingdom or elsewhere, any trade which includes the receipt of interest or dividends, and section 839 applies for the purposes of that subsection.”

(11) This section does not apply where the overseas dividend is paid before 1st January 1999 in pursuance of arrangements which were entered into before, and are not altered on or after, 17th March 1998.

(12) Subject to subsection (11) above, this section applies where the overseas dividend is paid on or after 17th March 1998.