Income Tax (Trading and Other Income) Act 2005

397 Tax credits for qualifying distributions [F1 of UK resident companies] : UK residents and eligible non-UK residents U.K.

(1) A UK resident or eligible non-UK resident receiving a qualifying distribution made by a UK resident company is entitled to a tax credit equal to one-ninth of the amount or value of the distribution (but see subsections (3) and (6)).

(2) Such a person may claim to deduct the tax credit from—

(a) the income tax charged on the person's total income for the tax year in which the distribution is made, F2 . . .

(b) F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Subsection (1) only applies so far as the distribution is brought into charge to tax, and accordingly if the person's total income is reduced by any deductions which fall to be made from the distribution, the tax credit for the distribution is reduced in the same proportion as the distribution.

(4) For the purposes of this section “eligible non-UK resident”, in relation to a qualifying distribution, means an individual who at any time in the tax year in which it is received is a non-UK resident within section 278(2) of ICTA [F3 or section 56(3) of ITA 2007] (Commonwealth citizens, EEA nationals etc.).

(5) If a distribution is, or is treated under any provision of the Tax Acts as, the income of a person (“P”) other than the recipient (“R”), P (not R) is treated as receiving it for the purposes of this section (and so P (not R) is entitled to a tax credit if P falls within subsection (1)).

(6) This section is subject to the following provisions—

• [F4 section 504(4) of ITA 2007 (disapplication of certain provisions for income of unauthorised unit trusts),

• section 592 of ITA 2007 (no tax credits for borrower under stock lending arrangement),

• section 593 of ITA 2007 (no tax credits for interim holder under repo),

• section 594 of ITA 2007 (no tax credits for original owner under repo),] and

• section 171(2B) of FA 1993 (no tax credit for distributions in respect of assets in Lloyd's member's premium trust fund).

Textual Amendments

F1 Words in s. 397 heading inserted (with effect in accordance with s. 34(2) of the amending Act) by Finance Act 2008 (c. 9), Sch. 12 para. 3

F2 S. 397(2)(b) and preceding word repealed (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1031, 1034, Sch. 1 para. 515(2), Sch. 3 Pt. 1 (with transitional provisions and savings in Sch. 2)

F3 Words in s. 397(4) inserted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 515(3) (with transitional provisions and savings in Sch. 2)

F4 Words in s. 397(6) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 515(4) (with transitional provisions and savings in Sch. 2)

Modifications etc. (not altering text)

C1 S. 397 excluded (19.7.2006) by Finance Act 2006 (c. 25), s. 121(5) (with Sch. 17 para. 18(2))

S. 397(1) excluded (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 504(4)(b) (with transitional provisions and savings in Sch. 2)

C2 S. 397 excluded by S.I. 2006/694, regs. 69Z18(5), 69Z19(2) (as inserted (6.4.2008) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2008 (S.I. 2008/705), regs. 1, 5)

C3 S. 397 excluded (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 549(2), 1184(1) (with Sch. 2)