Income Tax (Trading and Other Income) Act 2005

394 Distribution when dividend shares cease to be subject to SIP U.K.

(1) This section applies if dividend shares cease to be subject to an approved share incentive plan before the end of the period of 3 years beginning with the date on which the shares were acquired on the participant's behalf.

(2) For income tax purposes a distribution is treated as made to the participant in the tax year in which the shares cease to be subject to the plan.

(3) The amount of the distribution treated as made is the amount of the cash dividend applied to acquire the shares on the participant's behalf, so far as it represents a cash dividend paid in respect of plan shares in a UK resident company.

(4) The person liable for any tax charged on the distribution as a result of this section is the participant.

(5) For the purposes of determining—

(a) whether the participant is entitled to a tax credit under section 397 in respect of a distribution so charged, and

(b) if so, the amount of that tax credit,

that section applies as it has effect for the tax year in which the shares cease to be subject to the plan.

(6) But for the purposes of this Chapter, the question whether the distribution under subsection (2) is a distribution by a company that is UK resident is determined by reference to the year in which the company paid the dividend applied to acquire the shares on the participant's behalf.

(7) For rules identifying shares ceasing to be subject to approved share incentive plans, see section 508 of ITEPA 2003.