|
| |
|
3 | In the heading to section 397, after “distributions” insert “of UK resident |
| |
| |
4 | After section 397 insert— |
| |
“397A | Tax credits for distributions of non-UK resident companies: UK |
| |
residents and eligible non-UK residents |
| 5 |
(1) | This section applies where a UK resident or eligible non-UK |
| |
| |
(a) | receives a relevant distribution made by a non-UK resident |
| |
| |
(b) | is a minority shareholder in the company at the time the |
| 10 |
distribution is received. |
| |
(2) | The person is entitled to a tax credit equal to one-ninth of the amount |
| |
or value of the grossed up distribution (but see subsections (3) and |
| |
| |
(3) | Subsection (2) only applies so far as the distribution is brought into |
| 15 |
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 |
| |
| |
(4) | The person may claim to deduct the tax credit from the income tax |
| 20 |
charged on the person’s total income for the tax year in which the |
| |
distribution (or the part of the distribution to which the tax credit |
| |
relates) is brought into charge to tax. |
| |
(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 |
| 25 |
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— |
| |
section 171(2B) of FA 1993 (no tax credit for distributions in |
| |
respect of assets in Lloyd’s member’s premium trust fund), |
| 30 |
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 |
| |
| |
section 593 of ITA 2007 (no tax credits for interim holder under |
| 35 |
| |
section 594 of ITA 2007 (no tax credits for original owner under |
| |
| |
| |
“eligible non-UK resident”, in relation to a distribution, means |
| 40 |
an individual who, at any time in the tax year in which the |
| |
distribution (or the part of the distribution to which the tax |
| |
credit relates) is brought into charge to tax, is a non-UK |
| |
resident who meets the condition in section 56(3) of ITA 2007 |
| |
(residence etc of claimants), |
| 45 |
“grossed up distribution” means the distribution increased by |
| |
the amount of any tax chargeable in respect of the |
| |
distribution directly or by deduction under the laws of the |
| |
|
| |
|
| |
|
territory in which the company is resident, including special |
| |
| |
“minority shareholder”, in relation to a company, has the |
| |
meaning given in section 397C, |
| |
“relevant distribution”, in relation to a person, means— |
| 5 |
(a) | a qualifying distribution arising in a relevant tax year, |
| |
(b) | a cash dividend paid over to the person under |
| |
paragraph 68(4) of Schedule 2 of ITEPA 2003 (cash |
| |
dividend paid over if not reinvested etc) in a relevant |
| |
| 10 |
(c) | a dividend treated under section 407 as paid to the |
| |
person in a relevant tax year, |
| |
“relevant tax year” means the tax year 2008-09 or a subsequent |
| |
| |
“special withholding tax” has the meaning given in section |
| 15 |
| |
(8) | Section 397B makes provision about the application of this section in |
| |
the case of overseas dividends arising from manufactured overseas |
| |
dividends (within the meaning of Chapter 2 of Part 11 of ITA 2007). |
| |
397B | Tax credits under section 397A: manufactured overseas dividends |
| 20 |
(1) | This section applies where, under section 581 of ITA 2007, a person |
| |
is treated as receiving an overseas dividend by virtue of having |
| |
received a manufactured overseas dividend which is representative |
| |
| |
(2) | For the purposes of section 397A, the person is treated as receiving a |
| 25 |
relevant distribution made by a non-UK resident company if, and |
| |
only if, the manufactured overseas dividend is representative of such |
| |
| |
(3) | References in section 397A to the grossed up distribution have effect |
| |
as if they were references to the gross amount of the overseas |
| 30 |
dividend of which the manufactured overseas dividend is |
| |
representative, disregarding the amount of any overseas tax credit. |
| |
| |
“gross amount”, in relation to a manufactured overseas |
| |
dividend, has the same meaning as in Chapter 2 of Part 11 of |
| 35 |
ITA 2007 (manufactured payments) (see section 589 of that |
| |
| |
“manufactured overseas dividend” and “overseas tax credit” |
| |
have the same meaning as in Chapter 2 of that Part (see |
| |
sections 581 and 591 of that Act), and |
| 40 |
“overseas dividend” has the same meaning as in that Part (see |
| |
sections 567 of that Act). |
| |
397C | Meaning of “minority shareholder” |
| |
(1) | In section 397A “minority shareholder”, in relation to a non-UK |
| |
resident company, means a person whose shareholding in the |
| 45 |
company is less than 10% of the company’s issued share capital. |
| |
|
| |
|
| |
|
(2) | Subsections (3) to (6) make provision about the circumstances in |
| |
which shares form part of a person’s shareholding in a company for |
| |
the purposes of this section. |
| |
(3) | Shares form part of a person’s shareholding in a company to the |
| |
extent that the person is beneficially entitled to the shares or to a |
| 5 |
distribution arising in respect of the shares (or both). |
| |
(4) | Shares form part of a person’s shareholding in the company where— |
| |
(a) | a person is a settlor in relation to a settlement, and |
| |
(b) | income arising from shares comprised in the settlement is |
| |
treated for income tax purposes as the income of that person |
| 10 |
and of that person alone. |
| |
(5) | Shares form part of the shareholding in a company of a person (“P”) |
| |
| |
(a) | they form part of the shareholding in the company of a |
| |
| 15 |
(b) | P transferred the shares to the connected person or arranged |
| |
for the connected person to acquire the shares, and |
| |
(c) | the purpose of the transfer or arrangement was wholly or |
| |
mainly to enable P to avoid tax. |
| |
(6) | Shares form part of a person’s shareholding in a company if that |
| 20 |
person has transferred the shares to another person under a repo or |
| |
stock lending arrangement. |
| |
| |
“repo” has the same meaning as in Part 11 of ITA 2007 (see |
| |
section 569 of that Act), |
| 25 |
“settlement” and “settlor” have the same meaning as in Chapter |
| |
5 of Part 5 of this Act, and |
| |
“stock lending arrangement” has the same meaning as in Part 11 |
| |
of ITA 2007 (see section 568 of that Act).” |
| |
5 | In section 398(1) (increase in amount or value of dividends where tax credit |
| 30 |
| |
(a) | after “a tax credit” insert “under section 397 or 397A”, and |
| |
(b) | for “section 397(1)” substitute “sections 397(1) and 397A(2)”. |
| |
6 | In section 399(1) (qualifying distributions received by persons not entitled to |
| |
tax credits), after “a tax credit” insert “under section 397 or 397A”. |
| 35 |
| |
| |
| |
7 | TMA 1970 is amended as follows. |
| |
8 | In section 8(1AA)(b) (personal return: amount payable by way of income |
| 40 |
tax), after “397(1)” insert “or 397A(2)”. |
| |
9 | In section 8A(1AA)(b) (trustee’s return: amount payable by way of income |
| |
tax), after “397(1)” insert “or 397A(2)”. |
| |
|
| |
|
| |
|
10 | In section 9(1)(b) (self-assessment of amount payable by way of income tax), |
| |
after “397(1)” insert “or 397A(2)”. |
| |
11 | In section 12AA(1A)(b) (partnership return: amount payable by way of |
| |
income tax), after “397(1)” insert “or 397A(2)”. |
| |
12 | In section 12AB(5) (partnership statement), in the definition of “tax credit”, |
| 5 |
after “397(1)” insert “or 397A(2)”. |
| |
13 | In section 59A(8)(b) (payments on account of income tax), after “397(1)” |
| |
| |
14 | In section 59B(2)(b) (payment of income tax), after “397(1)” insert “or |
| |
| 10 |
| |
15 | In section 824(4A)(b) of ICTA (repayment supplements: individuals and |
| |
others), after “397(1)” insert “or 397A(2)”. |
| |
| |
16 | In section 171(2B) of FA 1993 (Lloyd’s underwriters etc: taxation of profits |
| 15 |
and allowance of losses), for “Section 397(1)” substitute “Sections 397(1) and |
| |
| |
| |
17 | ITTOIA 2005 is amended as follows. |
| |
18 | In section 403(1) (dividends from non-UK resident companies: income |
| 20 |
| |
19 | In section 406 (dividends of non-UK resident companies: later charge where |
| |
cash dividends retained in SIPs are paid over), after subsection (4) insert— |
| |
“(4A) | For the purposes of determining— |
| |
(a) | whether the participant is entitled to a tax credit under |
| 25 |
section 397A in respect of a cash dividend so charged, and |
| |
(b) | the amount of that tax credit, |
| |
| that section applies as it has effect for the tax year in which the cash |
| |
| |
20 | In section 407 (dividends of non-UK resident companies: dividend payment |
| 30 |
when dividend shares cease to be subject to SIP), after subsection (4) insert— |
| |
“(4A) | For the purposes of determining— |
| |
(a) | whether the participant is entitled to a tax credit under |
| |
section 397A in respect of a dividend so charged, and |
| |
(b) | the amount of that tax credit, |
| 35 |
| that section applies as it has effect for the tax year in which the shares |
| |
cease to be subject to the plan.” |
| |
21 | In section 408 (reduction in tax due in cases within section 407), after |
| |
|
| |
|
| |
|
| |
“(2A) | In subsection (2) “the tax due” means the amount of tax due as a |
| |
result of section 407 after deduction of the tax credit determined in |
| |
accordance with section 407(4A).” |
| |
22 | In section 688(1) (income not otherwise charged), omit “full”. |
| 5 |
| |
23 | ITA 2007 is amended as follows. |
| |
24 | In section 425(5) (gift aid: deductions when calculating total amount of |
| |
income tax to which individual charged for a tax year)— |
| |
(a) | in paragraph (a), omit “and” at the end of sub-paragraph (v), and |
| 10 |
(b) | insert at the end “, and |
| |
(c) | the amount of any tax credit under section 397A of |
| |
ITTOIA 2005 (tax credits for distributions of non-UK |
| |
resident companies: UK residents and eligible non- |
| |
| 15 |
25 | In section 504(4)(b) (provisions that do not apply to income of unauthorised |
| |
unit trusts), for “section 397(1)” substitute “sections 397(1) and 397A(2)”. |
| |
26 (1) | Section 567 (meaning of “overseas securities” etc) is amended as follows. |
| |
(2) | After subsection (1) insert— |
| |
“(1A) | “Overseas shares” means shares in a non-UK resident company.” |
| 20 |
(3) | After subsection (2) insert— |
| |
“(2A) | “Overseas securities” includes overseas shares.” |
| |
(4) | Accordingly, in the heading, after “of” insert ““overseas shares”,”. |
| |
27 (1) | Section 592 (no tax credits for borrower under stock lending arrangement) is |
| |
| 25 |
| |
(a) | in paragraph (a), insert at the end “or overseas shares,”, |
| |
(b) | in paragraph (c), omit “UK”, and |
| |
| |
(i) | after “manufactured dividend” insert “or manufactured |
| 30 |
| |
(ii) | after “UK shares” insert “or overseas shares”. |
| |
(3) | In subsection (2), after “397(1)” insert “or 397A(2)”. |
| |
28 (1) | Section 593 (no tax credits for interim holder under repo) is amended as |
| |
| 35 |
| |
(a) | in paragraph (a), after “UK shares” insert “or overseas shares”, |
| |
(b) | in paragraphs (b) and (d), omit “UK”, and |
| |
| |
(i) | after “manufactured dividend” insert “or manufactured |
| 40 |
| |
|
| |
|
| |
|
(ii) | after “UK shares” insert “or overseas shares”. |
| |
(3) | In subsection (2), after “397(1)” insert “or 397A(2)”. |
| |
29 (1) | Section 594 (no tax credits for original owner under repo) is amended as |
| |
| |
| 5 |
(a) | in paragraph (a), after “UK shares” insert “or overseas shares”, |
| |
(b) | in paragraph (b), omit “UK”, |
| |
| |
(i) | after “manufactured dividend” insert “or manufactured |
| |
| 10 |
| |
(d) | in paragraph (e), after “manufactured dividend” insert “or |
| |
manufactured overseas dividend”. |
| |
(3) | In subsection (2), after “397(1)” insert “or 397A(2)”. |
| |
30 (1) | Section 595 (meaning of “manufactured dividend”) is amended as follows. |
| 15 |
(2) | For “has” substitute “and “manufactured overseas dividend” have”. |
| |
(3) | For “section 573(1)(a)” substitute “sections 573(1)(a) and 581(1)(a)”. |
| |
31 | In section 989 (definitions), in the definition of “tax credit”, after “397(1)” |
| |
| |
| 20 |
| |
Company gains from investment life insurance contracts |
| |
| |
| |
“investment life insurance contract” means— |
| |
(a) | a policy of life insurance which has, or is capable of acquiring, |
| 25 |
| |
(b) | a contract for a purchased life annuity, or |
| |
(c) | a capital redemption policy, |
| |
other than a relevant excluded contract, |
| |
“relevant company” means a company which is not a life insurance |
| 30 |
| |
“relevant excluded contract” means— |
| |
(a) | an investment life insurance contract under, or purchased |
| |
with sums or assets held for the purposes of, a registered |
| |
| 35 |
(b) | (subject to sub-paragraph (3)) a policy of life insurance issued |
| |
in respect of an insurance made before 14 March 1989. |
| |
(2) | In sub-paragraph (1)— |
| |
“capital redemption policy” means a contract made in the course of |
| |
capital redemption business (as defined in section 431(2ZF) of ICTA), |
| 40 |
|
| |
|
| |
|
“life insurance company” means— |
| |
(a) | an insurance company (as defined in subsection (2) of section |
| |
431 of ICTA) which carries on long-term business (as defined |
| |
| |
(b) | a friendly society which would be such an insurance |
| 5 |
company but for the words “(other than a friendly society)” |
| |
in the definition of “insurance company” in that subsection, |
| |
| |
“purchased life annuity” means an annuity— |
| |
(a) | granted for consideration in money or money’s worth in the |
| 10 |
ordinary course of a business of granting annuities on human |
| |
| |
(b) | payable for a term ending at a time ascertainable only by |
| |
reference to the end of a human life (whether or not it may in |
| |
some circumstances end before or after the life). |
| 15 |
(3) | A policy of life insurance issued in respect of an insurance made before 14 |
| |
March 1989 is to be treated for the purposes of this Schedule as issued in |
| |
respect of one made on or after that date if it is varied on or after that date so |
| |
| |
(a) | increase the benefits secured, or |
| 20 |
(b) | extend the term of the insurance; |
| |
| and any exercise of rights conferred by the policy is to be regarded for this |
| |
| |
| |
“fair value accounting” has the same meaning as in Chapter 2 of Part 4 |
| 25 |
of FA 1996 (see section 103(1) of that Act), |
| |
“non-trading credit” has the same meaning as in that Chapter (see |
| |
section 82(3) of that Act), |
| |
“registered pension scheme” has the same meaning as in Part 4 of FA |
| |
| 30 |
“related transaction” has the same meaning as in Chapter 2 of Part 4 of |
| |
FA 1996 (see section 84(5) and (6) of that Act). |
| |
Contract to be loan relationship |
| |
2 (1) | If a relevant company is a party to an investment life insurance contract, for |
| |
the purposes of Chapter 2 of Part 4 of FA 1996 the contract is, in relation to |
| 35 |
the company, a loan relationship of the company (as a creditor relationship). |
| |
| |
(a) | the amount or value of a lump sum payable under an investment life |
| |
contract by reason of death or the onset of critical illness, exceeds |
| |
(b) | the surrender value of the contract immediately before the time |
| 40 |
when the lump sum becomes payable, |
| |
| the excess is not to be brought into account as a credit under that Chapter |
| |
representing a profit from a related transaction arising by reason of the lump |
| |
| |
Increased non-trading credits |
| 45 |
3 (1) | This paragraph applies where— |
| |
|
| |
|