Income and Corporation Taxes Act 1988

[F1 1A Application of lower rate to income from savings and distributions. U.K.

(1) Subject to sections 469(2) [F2 , 686 and 720(5),] so much of any person’s total income for any year of assessment as—

(a) comprises income to which this section applies, and

(b) in the case of an individual, is not

[F3 (i) savings income falling within section 1(2)(aa), or

(ii)] income falling within section 1(2)(b),

shall, by virtue of this section, be charged for that year at the [F4 rate applicable in accordance with subsection (1A) below], instead of at the rate otherwise applicable to it in accordance with section 1(2)(aa) and (a).

[F5 (1AA) In subsection (1)(b)(i) above “savings income” means income to which this section applies other than—

(a) income chargeable under [F6 Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc., stock dividends from UK resident companies and loans to participators)], or

[F7 (b) dividends chargeable under Chapter 4 of Part 4 of that Act (dividends from non-UK resident companies) or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged).]]

[F8 (1A) The rate applicable in accordance with this subsection is—

(a) in the case of income chargeable under [F9 Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005], the [F10 dividend] ordinary rate;

[F11 (b) in the case of dividends chargeable under Chapter 4 of Part 4 of that Act or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act, the dividend ordinary rate; and]

(c) in the case of any other income, the lower rate.]

[F12 (1B) In relation to any year of assessment for which income tax is charged the lower rate is 20 per cent. or such other rate as Parliament may determine.]

(2) Subject to subsection (4) below, this section applies to the following income—

(a) any income [F13 (other than relevant foreign income) chargeable under—

(i) Chapter 2 of Part 4 of ITTOIA 2005 (charge on interest);

(ii) Chapter 7 of that Part of that Act (charge on purchased life annuity payments) other than income from annuities specified in section 718(2) of that Act; or

(iii) Chapter 8 of that Part of that Act (charge on profits from deeply discounted securities);]

[F14 (aa) any amount chargeable to tax F15 . . . by virtue of section 714, 716 or 723;]

(b) any income chargeable under [F16 Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005]; F17 . . .

(c) subject to subsection (4) below, any [F18 income falling within subsection (3) below][F19 ; and

(d) any amount included in an individual’s total income by virtue of section [F20 465 of ITTOIA 2005 (gains from contracts for life insurance etc.)].]

[F21 (3) The income which falls within this subsection is any relevant foreign income which—

(a) would fall within subsection (2)(a) but for the exclusion of relevant foreign income;

(b) is a dividend chargeable under Chapter 4 of Part 4 of ITTOIA 2005; or

(c) is a relevant foreign distribution chargeable under Chapter 8 of Part 5 of that Act.]

(4) This section does not apply to—

(a) any [F22 relevant foreign income which is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis)]; F23 . . .

F23 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F24 (5) For the purposes of subsection (1)(b) above and any other provisions of the Income Tax Acts [F25 (other than [F26 sections 535 to 537 of ITTOIA 2005])]—

(a) so much of any person’s income as comprises income to which this section applies shall be treated as the highest part of his income; and

(b) so much of that part as consists of—

(i) income chargeable under [F27 Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005] (if any), and

[F28 (ii) dividends chargeable under Chapter 4 of Part 4 of that Act (if any) or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act (if any),]

shall be treated as the highest part of that part.]

(6) Subsection (5) above shall have effect subject to section 833(3) but shall otherwise have effect notwithstanding any provision requiring income of any description to be treated for the purposes of the Income Tax Acts (other than [F29 sections 535 to 537 of ITTOIA 2005]) as the highest part of a person’s income.

[F30 (6A) Where income tax at the basic rate has been borne on income chargeable at the lower rate any necessary repayment of tax shall be made on the making of a claim.]

(7) F31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F32 (8) In this section “relevant foreign distribution” means any distribution of a company not resident in the United Kingdom which—

(a) is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b) would be chargeable under Chapter 3 of that Part of that Act if the company were resident in the United Kingdom.

(9) And, for the meaning of “relevant foreign income”, see section 832(1).]]

Textual Amendments

F1 S. 1A inserted (with effect in accordance with s. 73(3) of the amending Act) by Finance Act 1996 (c. 8), s. 73(1)

F2 Words in s. 1A(1) substituted (with effect in accordance with s. 100(3) of the amending Act) by Finance Act 1998 (c. 36), s. 100(1)

F3 Words in s. 1A(1)(b) inserted (with effect in accordance with s. 32(4) of the amending Act) by Finance Act 2000 (c. 17), s. 32(2)

F4 Words in s. 1A(1) substituted (with effect in accordance with s. 31(6) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 31(2)

F5 S. 1A(1AA) inserted (with effect in accordance with s. 32(4) of the amending Act) by Finance Act 2000 (c. 17), s. 32(3)

F6 Words in s. 1A(1AA)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(2)(a) (with Sch. 2)

F7 S. 1A(1AA)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(2)(b) (with Sch. 2)

F8 S. 1A(1A) inserted (with effect in accordance with s. 31(6) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 31(3)

F9 Words in s. 1A(1A)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(3)(a)(i) (with Sch. 2)

F10 Word in s. 1A(1A)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(3)(a)(ii) (with Sch. 2)

F11 S. 1A(1A)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(3)(b) (with Sch. 2)

F12 S. 1A(1B) inserted (with application in accordance with s. 22(12) of the amending Act) by Finance Act 1999 (c. 16), s. 22(7)(a)

F13 Words in s. 1A(2)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(4)(a) (with Sch. 2)

F14 S. 1A(2)(aa) inserted (with effect in accordance with s. 100(3) of the amending Act) by Finance Act 1998 (c. 36), s. 100(2)

F15 Words in s. 1A(2)(aa) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(4)(b), Sch. 3 (with Sch. 2)

F16 Words in s. 1A(2)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(4)(c) (with Sch. 2)

F17 Word preceding s. 1A(2)(c) repealed (with effect in accordance with s. 173(2) of the repealing Act) by Finance Act 2003 (c. 14), Sch. 35 para. 1(2), Sch. 43 Pt. 3(13), Note 1

F18 Words in s. 1A(2)(c) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(4)(d), Sch. 2

F19 S. 1A(2)(d) and preceding word inserted (with effect in accordance with s. 173(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 35 para. 1(2)

F20 Words in s. 1A(2)(d) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(4)(e) (with Sch. 2)

F21 S. 1A(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(5) (with Sch. 2)

F22 Words in s. 1A(4)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(6)(a) (with Sch. 2)

F23 S. 1A(4)(b) and preceding word repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(6)(b), Sch. 3 (with Sch. 2)

F24 S. 1A(5) substituted (with effect in accordance with s. 31(6) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 31(4)

F25 Words in s. 1A(5) inserted (with effect in accordance with s. 173(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 35 para. 1(3)

F26 Words in s. 1A(5) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(7)(a) (with Sch. 2)

F27 Words in s. 1A(5)(b)(i) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch 1 para. 3(7)(b) (with Sch. 2)

F28 S. 1A(5)(b)(ii) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(7)(c) (with Sch. 2)

F29 Words in s. 1A(6) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(8) (with Sch. 2)

F30 S. 1A(6A) inserted (with application in accordance with s. 22(12) of the amending Act) by Finance Act 1999 (c. 16), s. 22(7)(b)

F31 S. 1A(7) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 3(9), Sch. 3 (with Sch. 2)

F32 S. 1A(8)(9) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 4), Sch. 1 para. 3(10) (with Sch. 2)

Modifications etc. (not altering text)

C1 S. 1A extended (27.7.1999) Commonwealth Development Corporation Act 1999 (c. 20), s. 20, Sch. 3 para. 6(4) (with Sch. 3 para. 1)