PART I THE CHARGE TO TAX

Income tax

F1C11A Application of lower rate to income from savings and distributions.

1

Subject to sections 469(2) F5, 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

F9i

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 F2rate 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).

F101AA

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

a

income chargeable under F14Chapter 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

F15b

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).

F31A

The rate applicable in accordance with this subsection is—

a

in the case of income chargeable under F16Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005, the F17dividend ordinary rate;

F18b

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.

F71B

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 F19(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);

F6aa

any amount chargeable to tax F20. . . by virtue of section 714, 716 or 723;

b

any income chargeable under F21Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005; F11. . .

c

subject to subsection (4) below, any F22income falling within subsection (3) belowF12; and

d

any amount included in an individual’s total income by virtue of section F23465 of ITTOIA 2005 (gains from contracts for life insurance etc.).

F243

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 F25relevant foreign income which is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis); F26. . .

F26b

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F45

For the purposes of subsection (1)(b) above and any other provisions of the Income Tax Acts F13(other than F27sections 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 F28Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005 (if any), and

F29ii

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 F30sections 535 to 537 of ITTOIA 2005) as the highest part of a person’s income.

F86A

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F328

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).