Finance (No. 2) Bill (HC Bill 155)

(a) for “franked investment income” substitute “exempt ABGH
distributions”, and

(b) for “is” substitute “are”.

(3) In subsection (3) (exclusion of franked investment income received from
5certain subsidiaries etc), for “franked investment income” substitute
“exempt ABGH distribution”.

(4) After subsection (4) insert—

“(5) In this section “exempt ABGH distribution” means a distribution
which—

(a) 10is a distribution for the purposes of the Corporation Tax Acts
only because it falls within paragraph A, B, G or H in section
1000(1), and

(b) is exempt for the purposes of Part 9A of CTA 2009 (company
distributions).”

24 15For section 463(7) (loan to trustees of settlement which has ended: amount
on which debtor taxed when all or part of loan released or written off)
substitute—

“(7) The amount which Y is treated as receiving is equal to the amount
released or written off.”

25 (1) 20Section 549 (distributions: supplementary) is amended as follows.

(2) Omit subsection (2) (which excludes entitlement to tax credits).

(3) In subsection (2A) (which disapplies sections 409 to 414 of ITTOIA 2005), for
“414” substitute “413A”.

26 (1) Section 751 (interpretation of Part 15 (transactions in securities)) is amended
25as follows.

(2) The existing text becomes subsection (1).

(3) In that subsection, in the definition of “dividends”, omit “qualifying”.

(4) After that subsection insert—

“(2) In the definition of “dividends” given by subsection (1), “other
30distributions” does not include a distribution which is a distribution
for the purposes of the Corporation Tax Acts only because it falls
within paragraph C or D in section 1000(1) (redeemable share capital
or security issued as bonus in respect of shares in, or securities of, the
company).”

27 35Omit section 814D(8) (which excludes entitlement to tax credits).

28 Omit section 997(5) (which introduces sections 1109 to 1111).

29 In sections 1026(1)(b) and 1027(2)(b) (cases where amount paid up in respect
of bonus shares does not fall to be treated as a qualifying distribution) omit
“qualifying”.

30 (1) 40Section 1070 (distributions by company carrying on mutual business) is
amended as follows.

(2) In subsection (2) (provisions about distributions apply to company’s
distributions only where made out of taxed profits or franked investment

income), for paragraph (b) (franked investment income) substitute—

“(b) income of the company consisting of exempt ABGH
distributions.”

(3) After subsection (5) insert—

“(5A) 5In subsection (2) “exempt ABGH distribution” means a distribution
which—

(a) is a distribution for the purposes of the Corporation Tax Acts
only because it falls within paragraph A, B, G or H in section
1000(1), and

(b) 10is exempt for the purposes of Part 9A of CTA 2009 (company
distributions).”

31 (1) Section 1071 (company not carrying on business) is amended as follows.

(2) In subsection (5) (provisions about distributions apply to company’s
distributions only where made out of taxed profits or franked investment
15income), for paragraph (b) (franked investment income) substitute—

“(b) income of the company consisting of exempt ABGH
distributions.”

(3) After subsection (5) insert—

“(5A) In subsection (5) “exempt ABGH distribution” means a distribution
20which—

(a) is a distribution for the purposes of the Corporation Tax Acts
only because it falls within paragraph A, B, G or H in section
1000(1), and

(b) is exempt for the purposes of Part 9A of CTA 2009 (company
25distributions).”

32 (1) Section 1100 (qualifying distribution: right to request a statement) is
amended as follows.

(2) In subsection (1) (requests for statement)—

(a) for “qualifying distribution” substitute “distribution to which this
30section applies”, and

(b) omit paragraph (b) (amount of any tax credit), and the “and”
preceding it.

(3) After subsection (4) insert—

“(4A) This section applies to any distribution other than one which is a
35distribution for the purposes of the Corporation Tax Acts only
because it falls within paragraph C or D in section 1000(1)
(redeemable share capital or security issued as bonus in respect of
shares in, or securities of, the company).”

(4) Omit subsections (2) and (5) (interpretation of subsection (1)(b)).

(5) 40In subsection (7) (section to be read with section 396A(2) of ITTOIA 2005)—

(a) for “needs” substitute “, and sections 1101 to 1103, need”, and

(b) for “as “qualifying distributions” for the purposes of this section”
substitute “as distributions to which this section applies”.

(6) In the heading, for “Qualifying” substitute “Certain”.

33 (1) Section 1101 (non-qualifying distributions etc: returns and information) is
amended as follows.

(2) In subsection (1) (duty to make return), for “which is not a qualifying
distribution” substitute “to which section 1100 does not apply”.

(3) 5In subsection (4) (duty to make return where not clear whether distribution
is non-qualifying), for “which is not a qualifying distribution” substitute “to
which section 1100 does not apply”.

(4) In the heading, and in the heading of section 1102, for “Non-qualifying”
substitute “Other”.

34 10In section 1103 (regulations about information about non-qualifying
distributions)—

(a) in subsection (2) (purpose for which sections 1101 and 1102 may be
rewritten), for “which are not qualifying distributions” substitute “to
which section 1100 does not apply”,

(b) 15in subsection (4) (special arrangements about matters specified in
subsection (5)), for “matters” substitute “matter”, and

(c) in subsection (5)—

(i) for “Those matters are” substitute “That matter is”, and

(ii) omit paragraph (b) (tax credits), and the “and” preceding it.

35 (1) 20Section 1106 (interpretation of sections 1104 and 1105) is amended as
follows.

(2) In subsection (4) (meaning of “tax certificate”)—

(a) after paragraph (a) insert “and”, and

(b) omit paragraph (c) (tax credits), and the “and” preceding it.

(3) 25Omit subsections (5) and (6) (interpretation of subsection (4)(c)).

36 Omit sections 1110 and 1111 (recovery of overpaid tax credits etc).

37 (1) Section 1115 (meaning of “new consideration” in Part 23) is amended as
follows.

(2) In subsections (5)(a) and (6)(b) for “qualifying” substitute “non-CD”.

(3) 30After subsection (6) insert—

“(7) In this section “non-CD distribution” means any distribution other
than one which is a distribution for the purposes of the Corporation
Tax Acts only because it falls within paragraph C or D in section
1000(1) (redeemable share capital or security issued as bonus in
35respect of shares in, or securities of, the company).”

38 In section 1119 (definitions for the purposes of the Corporation Tax Acts)
omit the entries for “franked investment income”, “qualifying distribution”
and “tax credit”.

39 Omit section 1126 (meaning of “franked investment income”).

40 40Omit section 1136 (meaning of “qualifying distribution”).

41 Omit section 1139(4) (“relief” includes tax credit).

42 In Schedule 2 (transitionals and savings etc) omit paragraph 106(1)
(operation of sections 1026 and 1027 in relation to share capital issued before
7 April 1973).

43 In Schedule 4 (index of defined expressions) omit the entries for “franked
5investment income”, “qualifying distribution” and “tax credit”.

Other amendments

44 (1) TMA 1970 is amended as follows.

(2) In section 8(1AA)(b) (payable income tax is chargeable amount less tax
deducted at source and tax credits) omit the words after “source”.

(3) 10In section 8A(1AA)(b) (payable income tax is chargeable amount less tax
deducted at source and tax credits) omit the words after “source”.

(4) In section 9(1) (self-assessment)—

(a) in paragraph (b) (payable income tax is assessed amount less tax
deducted at source and tax credits) omit the words after “source”,
15and

(b) in the words after paragraph (b) omit “, 400(2), 414(1), 421(1)”.

(5) In section 12AA(1A)(b) (partner’s payable income tax is chargeable amount
less tax deducted at source and tax credits) omit the words after “source”.

(6) In section 12AB (partnership statement in partnership return)—

(a) 20in subsection (1)(a)—

(i) after sub-paragraph (ia) insert “and”, and

(ii) omit sub-paragraph (iii) (tax credits), and the “and”
preceding it,

(b) in subsection (1)(b) for “, tax or credit” substitute “or tax”, and

(c) 25in subsection (5) omit the definition of “tax credit”.

(7) In section 12B(4A)(a)(i) (statements themselves must be preserved if of
amount of qualifying distribution and tax credit), after “amount” insert “of
distribution, formerly amount”.

(8) In section 59A(8)(b) (amounts included in annual total of deductions at
30source) omit “or are tax credits to which section 397(1) or 397A(1) of ITTOIA
2005 applies,”.

(9) In section 59B (payment of income tax and capital gains tax)—

(a) in subsection (1) omit “, 400(2), 414(1), 421(1)”, and

(b) in subsection (2)(b) omit “or is a tax credit to which section 397(1) or
35397A(1) of ITTOIA 2005 applies,”.

(10) Omit section 87A(5) (interest on assessments under section 1110 of CTA 2010
on overpaid tax credits etc).

(11) In section 98 (special returns), in the first column of the table omit the entry
for section 1109 of CTA 2010.

45 (1) 40ICTA is amended as follows.

(2) Omit section 231B (arrangements to pass on value of tax credit).

(3) Omit section 824(2) (repayment supplements: tax credits).

(4) In section 824(4A) omit paragraph (b) (repayment supplements: tax credit
treated as income tax deducted at source), and the “and” preceding it.

(5) In section 825(1) (repayment supplements: companies) omit paragraph (c)
(tax credits comprised in franked investment income), and the “or”
5preceding it.

(6) In section 826 (interest on tax overpaid by companies)—

(a) in subsection (1) omit paragraph (c) (tax credits), including the “or”
at the end, and

(b) in subsection (3)—

(i) 10omit “or a payment of the whole or part of a tax credit falling
within subsection (1)(c) above”, and

(ii) omit “or, as the case may be, the franked investment income
referred to in subsection (1)(c) above”.

46 In FA 1988, in Schedule 13 omit paragraph 7(c) (post-consolidation
15amendment of section 824(2) of ICTA).

47 In FA 1989—

(a) omit section 115 (double taxation: tax credits), and

(b) in section 179(1)(b)(i) (amendments of provisions of TMA 1970
including section 87A(1) and (5)) omit “and (5)”.

48 20In FA 1993 omit section 171(2B) (which excludes entitlement to tax credits).

49 In FA 1994 omit section 219(4B) (which excludes entitlement to tax credits).

50 (1) F(No.2)A 1997 is amended as follows.

(2) Omit section 22(1) (which inserted section 171(2B) of FA 1993).

(3) Omit section 28 (which inserted section 231B of ICTA).

(4) 25Omit section 30(9) and (10) (effect of double taxation arrangements in
relation to tax credits).

(5) In Schedule 6 (repeal of provisions relating to foreign income dividends), in
paragraph 23 (transitional provision for certain foreign income dividends
paid before 6 April 1999 but received on or after that date) omit—

(a) 30“qualifying”, and

(b) “nine tenths of”.

51 (1) FA 1998 is amended as follows.

(2) Omit section 76(3) (regulations about tax credits where non-UK residents
have invested in individual savings accounts).

(3) 35In Schedule 18 (company tax returns etc)—

(a) omit paragraph 9(3) (certain claims by companies for payment of tax
credits),

(b) in paragraphs 22(3)(a)(i) and 23(3)(a)(i) (which relate to a statement
as to amount of qualifying distribution and tax credit), after
40“amount” insert “of distribution, but formerly amount”, and

(c) in paragraph 52(2)(a) omit “or payment of a tax credit”.

52 In the Commonwealth Development Corporation Act 1999, in Schedule 3
omit paragraph 6(2)(b) (provisions about tax credits do not apply in relation
to distributions by the Corporation).

53 In the Financial Services and Markets Act 2000 (Consequential
5Amendments) (Taxes) Order 2001 (S.I. 2001/3629S.I. 2001/3629)—

(a) omit article 82(a), and

(b) in article 87(a) omit “and (4B)”.

54 (1) ITEPA 2003 is amended as follows.

(2) Omit sections 58(6) and 61H(6) (tax credits to be reduced in line with
10reductions in distributions).

(3) In Part 2 of Schedule 1 (index of defined expressions) omit the entry for “tax
credit”.

55 In ITTOIA 2005, in Schedule 1 (minor and consequential amendments) omit
paragraphs 116, 331(2), 359, 360, 361(a), 363, 364, 376, 377(3), 464(3), 496, 503
15and 510(2).

56 (1) ITA 2007 is amended as follows.

(2) In section 26(1)(b) (list of provisions giving tax reductions), in the entry for
section 401 of ITTOIA 2005, for “qualifying distribution after linked non-
qualifying distribution” substitute “distribution repaying shares or security
20issued in earlier distribution”.

(3) In section 31 (calculation of total income)—

(a) omit subsection (3) (dividend etc treated as increased by amount of
tax credit), and

(b) in subsection (4), for “Subsections (2) and (3) apply” substitute
25“Subsection (2) applies”.

(4) In section 425(5) (deductions in calculating total amount of income tax for
gift aid purposes)—

(a) in paragraph (a)—

(i) in sub-paragraph (i) omit “or 400(2)”, and

(ii) 30omit sub-paragraphs (ii) and (iii),

(b) after paragraph (a) insert “and”, and

(c) omit paragraph (c), and the “and” before it.

(5) In section 482 (types of amount charged at special rates for trustees), in the
entry for Type 1 amounts, omit “qualifying”.

(6) 35In section 487(6) (non-UK resident trustees: disregarded income which is not
included in untaxed income)—

(a) after paragraph (a) insert “or”, and

(b) omit paragraph (c) (income in respect of which there is a tax credit),
and the “or” preceding it.

(7) 40In section 502(3) (non-UK resident beneficiaries: disregarded income which
is not included in untaxed income)—

(a) after paragraph (a) insert “or”, and

(b) omit paragraph (c) (income in respect of which there is a tax credit),
and the “or” preceding it.

(8) In section 614ZD (treatment of recipient of manufactured payment)—

(a) in subsection (3), for “to (6)” substitute “and (5)”, and

(b) omit subsection (6) (which excludes entitlement to tax credits).

(9) In section 687 (transactions in securities: meaning of “income tax
5advantage”)—

(a) omit “qualifying” in each place, and

(b) in subsection (4), after “In this section” insert “—

(a) “distribution” does not include a distribution which is
a distribution for the purposes of the Corporation Tax
10Acts only because it falls within paragraph C or D in
section 1000(1) of CTA 2010 (redeemable share capital
or security issued as bonus in respect of shares in, or
securities of, the company), and

(b) ”.

(10) 15In section 713 (interpretation of Chapter 1 (transactions in securities))—

(a) the existing text becomes subsection (1),

(b) in that subsection, in the definition of “dividends”, omit
“qualifying”, and

(c) after that subsection insert—

“(2) 20In the definition of “dividends” given by subsection (1),
“other distributions” does not include a distribution which is
a distribution for the purposes of the Corporation Tax Acts
only because it falls within paragraph C or D in section
1000(1) (redeemable share capital or security issued as bonus
25in respect of shares in, or securities of, the company).”

(11) In section 745(1) (transfer of assets abroad: same rate of tax not to be charged
twice)—

(a) after “at the basic rate,” insert “or”, and

(b) omit “or the dividend ordinary rate”.

(12) 30In section 809S(4) (meaning of “income tax advantage”) omit the words after
paragraph (d).

(13) In section 811(4) (limit on liability to income tax of non-UK residents)—

(a) after paragraph (a) insert “and”, and

(b) omit paragraph (c) (tax credits), and the “and” preceding it.

(14) 35In section 815(3) (limit on liability to income tax of non-UK resident
companies)—

(a) after paragraph (a) insert “and”, and

(b) omit paragraph (c) (tax credits), and the “and” preceding it.

(15) In section 989 (definitions for the purposes of the Income Tax Acts) omit the
40entries for “qualifying distribution” and “tax credit”.

(16) In section 1026 (“non-qualifying income” includes income on which tax
treated as paid)—

(a) in paragraph (a) (deemed payment under sections 399 and 400 of
ITTOIA 2005)—

(i) 45omit “or 400(2)”, and

(ii) for “from UK resident companies on which there is no tax
credit” substitute “to non-UK resident persons”, and

(b) omit paragraphs (b) and (c) (deemed payment under sections 414
and 421 of ITTOIA 2005).

(17) 5In Schedule 1 (minor and consequential amendments) omit paragraphs 26,
245(2)(a) and (3), 446(27), 515(3), 516, 517(2), 520 and 522.

(18) In Schedule 4 (index of defined expressions) omit the entries for “qualifying
distribution” and “tax credit”.

57 In FA 2008, in Schedule 12 (amendments relating to tax credits) omit
10paragraphs 3, 5, 6, 8 to 16, 19, 20, 24(b) and 31.

58 (1) CTA 2009 is amended as follows.

(2) In section 1222 (company with investment business: amount deductible for
management expenses to be reduced by income from sources not charged to
tax)—

(a) 15in subsection (1) (UK resident company), for paragraph (c) (franked
investment income does not reduce deductibles) substitute—

“(c) the income does not consist of exempt ABGH
distributions.”,”

(b) in subsection (2) (non-UK resident company), for paragraph (d)
20(franked investment income does not reduce deductibles)
substitute—

“(d) the income does not consist of exempt ABGH
distributions.”, and”

(c) after subsection (3) insert—

“(4) 25In this section “exempt ABGH distribution” means a
distribution which—

(a) is a distribution for the purposes of the Corporation
Tax Acts only because it falls within paragraph A, B,
G or H in section 1000(1) of CTA 2010, and

(b) 30is exempt for the purposes of Part 9A (company
distributions).”

(3) Omit section 1266(3) (partnerships with foreign element: entitlement to tax
credit).

(4) In Schedule 4 (index of defined expressions) omit the entry for “qualifying
35distribution”.

59 (1) FA 2009 is amended as follows.

(2) In Schedule 19 (amendments relating to tax credits) omit paragraphs 2(2)
and (3), 3, 5, 6(2)(a), (3) and (4), 7, 9, 10(a), 11, 12 and 13(c).

(3) In paragraph 14 of Schedule 19 (amendments made by the Schedule have
40effect in relation to distributions etc arising or paid on or after 22 April 2009),
after sub-paragraph (2) insert—

“(3) Section 873(4) of ITTOIA 2005 (inserted by paragraph 8), so far as
relating to any order or regulations made after the passing of FA
2016 under any provision of ITTOIA 2005 other than section
45397BA of that Act, has effect as if sub-paragraph (1) did not apply
in relation to it.”

(4) In Schedule 53 (late payment interest) omit—

(a) paragraph 6 (late payment interest start date in relation to
assessments of overpaid tax credits etc under section 1110 of CTA
2010), and

(b) 5the italic heading preceding it.

(5) In paragraph 9B of Schedule 54 (repayment interest start date: companies:
income tax and certain tax credits)—

(a) in sub-paragraph (1) omit paragraph (b) (tax credit comprised in
franked investment income), and the “and” preceding it, and

(b) 10in sub-paragraph (2)—

(i) omit “or payment”, and

(ii) omit “or the franked investment income mentioned in sub-
paragraph (1)(b)”.

(6) In paragraph 14 of Schedule 54 (interpretation) omit paragraph (b) (tax
15deducted at source treated as including tax credits), and the “and” preceding
it.

60 In Schedule 1 to CTA 2010 (minor and consequential amendments) omit
paragraphs 19, 153, 156(3), 282, 303(2), 456, 562(7), 704(27) and 722.

61 (1) TIOPA 2010 is amended as follows.

(2) 20In section 6(2) (effect of double taxation arrangements)—

(a) after paragraph (e) insert “or”, and

(b) omit paragraph (g) (tax credits), and the “or” preceding it.

(3) In section 187A (excess interest treated as a qualifying distribution), in
subsection (2), and the heading, omit “qualifying”.

(4) 25Omit section 234(2) (“relief” includes tax credit).

(5) In Schedule 8 (minor and consequential amendments) omit paragraphs 38,
51, 52, 66 and 67.

62 In FA 2011—

(a) in Part 6 of Schedule 23 (consequential provisions) omit paragraph
3064(3), and

(b) in Schedule 26 omit paragraph 1(2)(a)(i) (which amended section
231B of ICTA), including the “and” at the end.

63 In FA 2012, in section 169(2) (payments by certain friendly societies treated
as qualifying distributions) omit “qualifying”.

64 35In FA 2013—

(a) in paragraph 6(2) of Schedule 19 (which amends section 549 of CTA
2010), for “subsections (2) and” substitute “subsection”, and

(b) in Part 3 of Schedule 29 (manufactured dividends: consequential etc
amendments) omit paragraphs 13, 14(a) and 44(3).

65 40In FA 2015, in section 19—

(a) in subsection (1), for “credits etc” substitute “treated as paid”, and

(b) omit subsections (5) and (6) (which insert sections 397(5A) and
399(5A) of ITTOIA 2005).

Commencement

66 (1) Subject to the following sub-paragraphs of this paragraph, the amendments
made by this Schedule have effect in relation to dividends paid or arising (or
treated as paid), and other distributions made (or treated as made), in the tax
5year 2016-17 or at any later time.

(2) The following have effect for the tax year 2016-17 and subsequent tax
years—

(a) the amendments in sections 8 to 9, 12AA and 59B of TMA 1970,

(b) the amendments in sections 425, 745 and 1026 of ITA 2007,

(c) 10the repeals of paragraphs 359, 360, 361(a), 363 and 377(3) of Schedule
1 to ITTOIA 2005,

(d) the repeals of paragraphs 8 to 11 and 14 of Schedule 12 to FA 2008,
and

(e) the repeals of the following provisions of Schedule 19 to FA 2009—

(i) 15paragraph 9(a) and (b),

(ii) paragraph 9(c) so far as relating to section 12AA of TMA
1970, and

(iii) paragraph 9(d) so far as relating to section 59B of TMA 1970.

(3) The amendment in paragraph 23 of Schedule 6 to F(No.2)A 1997 has effect
20in relation to foreign income dividends received on or after 6 April 2016.

(4) The amendments in sections 393 and 406 of ITTOIA 2005, and the repeal of
paragraph 19 of Schedule 12 to FA 2008, have effect in relation to cash
dividends paid over in the tax year 2016-17 or at any later time.

(5) The amendment in section 396A of ITTOIA 2005 has effect in relation to
25things received on or after 6 April 2016 (even if the choice to receive them
was made before that date).

(6) The amendments in section 401 of ITTOIA 2005 have effect where the
subsequent distribution is made in the tax year 2016-17 or at any later time,
even if the prior distribution is made before 6 April 2016.

(7) 30The amendments in sections 411 and 414 of ITTOIA 2005, and the repeal of
paragraph 520 of Schedule 1 to ITA 2007, have effect in relation to stock
dividend income treated as arising in the tax year 2016-17 or at any later
time.

(8) The amendments in Chapter 6 of Part 4 of ITTOIA 2005 and in section 463 of
35CTA 2010, and the repeal of paragraph 522 of Schedule 1 to ITA 2007, have
effect in relation to amounts released or written off in the tax year 2016-17 or
at any later time.

(9) The amendments in section 614ZD of ITA 2007 have effect in relation to
manufactured payments made on or after 6 April 2016.

(10) 40The amendments in section 687 of ITA 2007 have effect where the relevant
consideration is received in the tax year 2016-17 or at any later time.

(11) The amendments in section 1222 of CTA 2009 have effect in relation to
income arising in the tax year 2016-17 or at any later time.

(12) The amendment in section 1026(1) of CTA 2010 has effect where the bonus
45share capital is issued on or after 6 April 2016.