366 Provisions which must be given priority over Part 4
(1) Any income, so far as it falls within—
(a) any Chapter of this Part, and
(b) Chapter 2 of Part 2 (receipts of a trade, profession or vocation),
is dealt with under Part 2.
(2) Any income, so far as it falls within—
(a) any Chapter of this Part, and
(b) Chapter 3 of Part 3 so far as the Chapter relates to a UK property business,
is dealt with under Part 3.
(3) Any income, so far as it falls within—
(a) any Chapter of this Part other than Chapter 3 or 6, and
(b) Part 2, 9 or 10 of ITEPA 2003 (employment income, pension income or social security income),
is dealt with under the relevant Part of ITEPA 2003.
(4) Nothing in this section prevents amounts both—
(a) being counted as income for the purposes of Chapter 9 of this Part (gains from contracts for life insurance etc.), and
(b) being taken into account in calculating income, or counting as income, for the purposes of other Parts of this Act,
but see section 527 (reduction for sums taken into account otherwise than under Chapter 9).
(1) Any income, so far as it falls within Chapter 2 (interest) and Chapter 8 (profits from deeply discounted securities), is dealt with under Chapter 8.
(2) Any income, so far as it falls within Chapter 3 (dividends etc. from UK resident companies etc.) and another Chapter, is dealt with under Chapter 3 (but this is subject to subsection (3)).
(3) Any income, so far as it falls within—
(a) Chapter 2 (interest) as a result of section 372 (building society dividends) , 378A (offshore fund distributions) or 379 ( payments by registered societies or certain co-operatives ), and
(b) Chapter 3 or Chapter 4 (or both),
is dealt with under Chapter 2.
(1) Income arising to a UK resident is chargeable to tax under this Part whether or not it is from a source in the United Kingdom.
(2) Income arising to a non-UK resident is chargeable to tax under this Part only if it is from a source in the United Kingdom.
(2A) If income arising to an individual who is UK resident arises in the overseas part of a split year, it is to be treated for the purposes of this section as arising to a non-UK resident.
(3) References in this section to income which is from a source in the United Kingdom include, in the case of any income which does not have a source, references to income which has a comparable connection to the United Kingdom.
(4) This section is subject to any express or implied provision to the contrary in this Part (or elsewhere in the Income Tax Acts).
368A Interpretation of special rules for temporary non-residents
(1) This section concerns provisions of this Part that are expressed to apply if an individual is “temporarily non-resident” (“TNR provisions”).
(2) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains for the purposes of TNR provisions—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what the following terms mean—
(i) “the temporary period of non-residence”,
(ii) “the year of departure”, and
(iii) “the period of return”.
(3) A reference in TNR provisions to “the year of return” is to the tax year consisting of or including the period of return.
(4) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax by virtue of any TNR provisions (or as preventing a charge to that tax from arising as a result).
(5) In this section and in TNR provisions, “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010.
(1) Income tax is charged on interest.
(2) The following sections extend what is treated as interest for certain purposes—
section 372 (building society dividends),
section 373 (open-ended investment company interest distributions),
section 376 (authorised unit trust interest distributions),
section 378A (offshore fund distributions),
section 379 ( payments by registered societies or certain co-operatives ),
section 380 (funding bonds),
section 380A (FSCS payments representing interest), and
section 381 (discounts).
(3) For exemptions, see in particular—
(a) Chapter 2 of Part 6 (national savings income),
(b) Chapter 3 of Part 6 (income from individual investment plans),
(c) Chapter 4 of Part 6 (SAYE interest),
(d) Chapter 6 of Part 6 (income from FOTRA securities),
(e) sections 749 to 756A( repayment interest, interest arising from repayment supplements, ... damages for personal injury, employees' share schemes, repayments of student loans, unpaid relevant contributions, the redemption of funding bonds , certain foreign currency securities and interest on certain deposits of victims of National-Socialist persecution) ...
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Subsection (1) is also subject to Chapter 3 of Part 12 of ITA 2007 (exemption for interest on securities to which Chapter 2 of that Part applies) .
(5) See also Chapter 3A of Part 14 of ITA 2007 (which provides for the receipts of certain types of company being wound up to be charged to income tax under that Chapter instead of under any other provision that would otherwise apply).
(1) Tax is charged under this Chapter on the full amount of the interest arising in the tax year.
(2) Subsection (1) is subject to Part 8 (foreign income: special rules).
(1) This section applies to the payment of an amount of interest in the form of—
(a) goods or services, or
(b) a voucher.
(2) Where this section applies by virtue of subsection (1)(a), the amount of the payment is to be taken to be equal to the market value, at the time the payment is made, of the goods or services.
(3) Where this section applies by virtue of subsection (1)(b), the amount of the payment is to be taken to be equal to whichever is the higher of—
(a) the face value of the voucher,
(b) the amount of money for which the voucher is capable of being exchanged, or
(c) the market value, at the time the payment is made, of any goods or services for which the voucher is capable of being exchanged.
(4) In this section references to a voucher are to a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services.
(1) Any dividend paid by a building society is treated as interest for the purposes of this Act.
(2) In this section “dividend”includes any distribution (whether or not described as a dividend) .
373 Open-ended investment company interest distributions
(1) This section applies if the distribution accounts of an open-ended investment company show the total amount available for distribution to owners of shares in the company as available for distribution as yearly interest.
(2) Subsection (1) is subject to subsection (7) .
(3) For income tax purposes payments of yearly interest are treated as made to the owners of the shares by the company.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) The amount of the payment treated as made to each owner is so much of the total amount mentioned in subsection (1) as is proportionate to the owner's shares.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) This section does not apply if the open-ended investment company is an approved personal pension scheme.
(8) See section 375 for the interpretation of this section and section 374.
374 Date when interest payments under section 373 made
(1) This section applies for determining the date on which payments of interest under section 373 are treated as made.
(2) The date on which the payments are treated as made depends on whether a date is specified for any distribution for the distribution period in question by or in accordance with—
(a) the company's instrument of incorporation and its prospectus in issue for the time being (including any supplements), or
(b) in the case of an open-ended investment company which is part of an umbrella company, such parts of those documents of the umbrella company as apply to the open-ended investment company.
(3) If such a date is so specified, the payments are treated as made on that date.
(4) If no such date is so specified, the payments are treated as made on the last day of that period.
(1) In sections 373 and 374 and this section—
“approved personal pension scheme” has the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of that Act),
“distribution” includes investment on behalf of an owner of shares in respect of the owner's accumulation shares,
“distribution accounts” means the accounts showing how the total amount available for distribution to owners of shares is calculated,
“distribution period” means the period by reference to which that amount is ascertained,
“the OEIC Regulations” means the Open-ended Investment Companies (Tax) Regulations 1997 (S.I. 1997/1154),
“open-ended investment company” has the same meaning as in Chapter 3 of Part 12 of ICTA (unit trust schemes etc.) (see section 468(10) and (11) of ICTA, as inserted by regulation 10 of the OEIC Regulations),
“owner of shares” has the same meaning as in that Chapter (see section 468(10) and (15) of that Act, as so inserted), and
“umbrella company” has the meaning given by section 615 of CTA 2010.
(2) In subsection (1) “accumulation share” means a share in respect of which income is credited periodically to the capital part of the company's scheme property.
(3) In subsection (2) “scheme property” has the same meaning as in Chapter 3 of Part 12 of ICTA (unit trust schemes etc.) (see section 468(10) and (13) of ICTA, as inserted by regulation 10 of the OEIC Regulations).
(1) This section applies if the distribution accounts of an authorised unit trust show the total amount available for distribution to unit holders as available for distribution as yearly interest.
(2) Subsection (1) is subject to subsection (7) .
(3) For income tax purposes payments of yearly interest are treated as made to the unit holders.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) The amount of the payment treated as made to each unit holder is so much of the total amount mentioned in subsection (1) as is proportionate to the unit holder's rights.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) This section does not apply if the authorised unit trust is an approved personal pension scheme.
(8) See section 378 for the interpretation of this section and section 377.
377 Date when interest payments under section 376 made
(1) This section applies for determining the date on which payments of interest under section 376 are treated as made.
(2) The date on which the payments are treated as made depends on whether a date is specified by or in accordance with the trust's terms for any distribution for the distribution period in question.
(3) If such a date is so specified, the payments are treated as made on that date.
(4) If no such date is so specified, the payments are treated as made on the last day of that period.
In sections 376 and 377—
“approved personal pension scheme” has the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of that Act),
“distribution” includes investment on behalf of a unit holder in respect of the holder's accumulation units,
“distribution accounts” means the accounts showing how the total amount available for distribution to unit holders is ascertained, and
“distribution period” means the period by reference to which that amount is ascertained.
(1) This section applies where—
(a) a dividend is paid by an offshore fund, and
(b) the offshore fund fails to meet the qualifying investments test at any time in the relevant period.
(2) The dividend is treated as interest for income tax purposes.
(3) For the purposes of this section, an offshore fund fails to meet the qualifying investments test if the market value of the fund's qualifying investments exceeds 60% of the market value of all of the assets of the fund (excluding cash awaiting investment).
(4) “The relevant period” means—
(a) the relevant period of account of the offshore fund, or
(b) if longer, the period of 12 months ending on the last day of that period.
(5) “The relevant period of account” means—
(a) the last period of account ending before the dividend is paid, in a case in which the profits available for distribution at the end of that period (and not used since then by distribution or otherwise) equal or exceed the amount of the dividend (aggregated with any other distribution made by the offshore fund at the same time), and
(b) the period of account in which the dividend is paid, in any other case.
(6) This section applies to a manufactured overseas dividend if, and only if, it is representative of a distribution to which this section would apply.
(7) In this section—
“dividend” includes any distribution that (but for this section) would be treated as a dividend for income tax purposes;
“manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments);
“offshore fund” has the same meaning as in section 354 of TIOPA 2010 (see sections 355 to 363 of that Act);
“qualifying investments” has the meaning given in section 494 of CTA 2009.
379 Payments by registered societies or certain co-operatives
(1) Any dividend, bonus or other sum payable to a shareholder in—
(a) registered society , or
(b) a UK agricultural or fishing co-operative,
is treated as interest for income tax purposes if it is payable by reference to the amount of the shareholder's holding in its share capital.
(2) In subsection (1)—
“registered society” means—
a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014,
a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969,
a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 ( S.I. 1985/1205 (N.I. 12)), or
an SCE formed in accordance with Council Regulation ( EC ) No 1435/2003 on the Statute for a European Cooperative Society, and
“UK agricultural or fishing co-operative” means a co-operative association—
which is established in the United Kingdom and UK resident, and
whose primary object is assisting its members in—
carrying on agricultural or horticultural businesses on land occupied by them in the United Kingdom, or
carrying on businesses consisting in the catching or taking of fish or shellfish.
(3) In subsection (2) “co-operative association” means a body with a written constitution from which the Secretary of State considers that it is in substance a co-operative association.
(4) For the purposes of subsection (3), the Secretary of State must have regard to the way in which the body's constitution provides for its income to be applied for its members' benefit and all other relevant provisions.
(5) In Northern Ireland subsections (3) and (4) apply with the substitution for “the Secretary of State” of “ the Department of Agriculture and Rural Development” ”.
(1) This section applies to the issue of funding bonds to a creditor in respect of a liability to pay interest on a debt incurred by a government, public institution, other public authority or body corporate.
(2) The issue is treated for income tax purposes as if it were the payment of so much of that interest as equals the market value of the bonds at their issue.
(3) In this section “funding bonds” includes any bonds, stocks, shares, securities or certificates of indebtedness (but does not include any instrument providing for payment in the form of goods or services or a voucher) .
(1) Any payment representing interest which is made under the FSCS is treated as interest for the purposes of this Act.
(2) “Payment representing interest” means a payment calculated in the same way as interest which would have been paid to the recipient but for the circumstances giving rise to the making of payments under the FSCS.
(3) Where a payment representing interest is made net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest, the amount treated as interest by this section is the aggregate of the payment representing interest and that sum.
(4) This section applies to payments made under the FSCS whether or not they are made (in whole or in part) on behalf of the Treasury or any other person.
(5) In this section “the FSCS” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000).
(1) All discounts, other than discounts in deeply discounted securities, are treated as interest for the purposes of this Act.
(2) In this section “deeply discounted securities” means securities to which Chapter 8 of this Part applies (profits from deeply discounted securities).
(1) This Chapter applies where a person is party to an arrangement which produces for the person a return in relation to any amount which is economically equivalent to interest.
(2) Income tax is charged on the return if the return is not charged to income tax under or as a result of any other provision of this Act or any other Act.
(3) Subsection (2) does not apply to a return that would be charged to income tax under or as a result of another provision but for an exemption.
(4) For the purposes of this Chapter a return produced for a person by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)—
(a) it is reasonable to assume that it is a return by reference to the time value of that amount of money,
(b) it is at a rate reasonably comparable to what is (in all the circumstances) a commercial rate of interest, and
(c) at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it.
(5) In subsection (4)(c) “the relevant time” means the time when the person becomes party to the arrangement or, if later, when the arrangement begins to produce a return for the person.
(6) In this Chapter “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(1) This section applies if at any time a tax other than income tax (“the other tax”) is charged in relation to a return on which income tax is charged under this Chapter.
(2) In order to avoid a double charge to tax in respect of the return, a person may make a claim for one or more consequential adjustments to be made in respect of the other tax.
(3) On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.
(4) Consequential adjustments may be made—
(a) in respect of any period,
(b) by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and
(c) despite any time limit imposed by or under any enactment.
(1) This Chapter does not apply in relation to an arrangement that produces a return for a person, in relation to an amount, which is economically equivalent to interest where—
(a) the arrangement involves only excluded shares, and
(b) no relevant arrangement has been made (by any person) in relation to those excluded shares.
(2) For the purposes of this section shares are excluded shares if they are admitted to trading on a regulated market and—
(a) they were issued before 6 April 2013, or
(b) if issued on or after that date, at the time of issue no arrangements involving only the shares would produce a return, in relation to an amount, which is economically equivalent to interest.
(3) In subsection (2) “regulated market” means—
(a) a UK regulated market within the meaning given by Article 2.1(13A) of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments,
(b) an EU regulated market within the meaning given by Article 2.1(13B) of that Regulation, and
(c) a Gibraltar regulated market within the meaning given by Article 26(11)(b)(i) of that Regulation.
(4) For the purposes of this section an arrangement is relevant, in relation to excluded shares, where—
(a) the arrangement is made on or after 6 April 2013, and
(b) it is reasonable to assume that the main purpose, or one of the main purposes, of the arrangement is to secure that arrangements involving only the shares produce a return, in relation to an amount, which is economically equivalent to interest.
(1) This Chapter—
(a) imposes a charge to income tax on dividends and other distributions of UK resident companies (see section 383),
(b) treats dividends as paid in some circumstances (see sections 386 to 391), ...
(c) makes special provision where the charge is in respect of shares awarded under a Schedule 2 share incentive plan (see sections 392 to 396), and
(d) treats distributions as made in some circumstances (see section 396A).
(2) This Chapter also makes provision about ... tax being treated as paid and reliefs available in respect of certain distributions which applies whether or not the distributions are otherwise dealt with under this Chapter (see sections 399 to 401).
(3) For exemptions from the charge under this Chapter, see in particular—
Chapter 3 of Part 6 (income from individual investment plans),
Chapter 5 of that Part (venture capital trust dividends),
section 770 (amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment), and
section 498 of ITEPA 2003 (no charge on shares ceasing to be subject to SIP in certain circumstances).
(4) In this Chapter “dividends” does not include income treated as arising under section 410 (stock dividends).
383 Charge to tax on dividends and other distributions
(1) Income tax is charged on dividends and other distributions of a UK resident company.
(2) For income tax purposes such dividends and other distributions are to be treated as income.
(3) For the purposes of subsection (2), it does not matter that those dividends and other distributions are capital apart from that subsection.
(1) Tax is charged under this Chapter on the amount or value of the dividends paid and other distributions made in the tax year.
(2) Subsection (1) is subject to—
section 393(2) and (3) (later charge where cash dividends retained in SIPs are paid over), and
section 394(3) (distribution when dividend shares cease to be subject to SIP).
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) The person liable for any tax charged under this Chapter is—
(a) the person to whom the distribution is made or is treated as made (see Part 6 of ICTA and sections 386(3) , 389(3) and 396A ), or
(b) the person receiving or entitled to the distribution.
(2) Subsection (1) is subject to—
section 393(4) (later charge where cash dividends retained in SIPs are paid over), and
section 394(4) (distribution when dividend shares cease to be subject to SIP).
386 Open-ended investment company dividend distributions
(1) This section applies if the distribution accounts of an open-ended investment company show the total amount available for distribution to owners of shares in the company as available for distribution as dividends.
(2) Subsection (1) is subject to subsection (5).
(3) For income tax purposes dividends are treated as paid to the owners of the shares by the company.
(4) The amount of the dividends treated as paid to each owner is so much of the total amount mentioned in subsection (1) as is proportionate to the owner's shares.
(5) This section does not apply if the open-ended investment company is an approved personal pension scheme.
(6) See section 388 for the interpretation of this section and section 387.
(1) This section applies for determining the date on which dividends are treated as paid under section 386.
(2) The date on which the dividends are treated as paid depends on whether a date is specified for the distribution period in question by or in accordance with—
(a) the company's instrument of incorporation and its prospectus in issue for the time being (including any supplements), or
(b) in the case of an open-ended investment company which is part of an umbrella company, such parts of those documents of the umbrella company as apply to the open-ended investment company.
(3) If such a date is so specified, the dividends are treated as paid on that date.
(4) If no such date is so specified, the dividends are treated as paid on the last day of that period.
(1) In sections 386 and 387 and this section—
“approved personal pension scheme” has the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of that Act),
“distribution” includes investment on behalf of an owner of shares in respect of the owner's accumulation shares,
“distribution accounts” means the accounts showing how the total amount available for distribution to owners of shares is calculated,
“distribution period” means the period by reference to which that amount is ascertained,
“the OEIC Regulations” means the Open-ended Investment Companies (Tax) Regulations 1997 (S.I. 1997/1154),
“open-ended investment company” has the same meaning as in Chapter 3 of Part 12 of ICTA (unit trust schemes etc.) (see section 468(10) and (11) of ICTA, as inserted by regulation 10 of the OEIC Regulations),
“owner of shares” has the same meaning as in that Chapter (see section 468(10) and (15) of that Act, as so inserted), and
“umbrella company” has the meaning given by section 615 of CTA 2010.
(2) In subsection (1) “accumulation share” means a share in respect of which income is credited periodically to the capital part of the company's scheme property.
(3) In subsection (2) “scheme property” has the same meaning as in Chapter 3 of Part 12 of ICTA (unit trust schemes etc.) (see section 468(10) and (13) of ICTA, as inserted by regulation 10 of the OEIC Regulations).
(1) This section applies if the distribution accounts of an authorised unit trust show the total amount available for distribution to unit holders as available for distribution as dividends.
(2) Subsection (1) is subject to subsection (6).
(3) For income tax purposes dividends are treated as paid to the unit holders.
(4) The amount of the dividends treated as paid to each unit holder is so much of the total amount mentioned in subsection (1) as is proportionate to the unit holder's rights.
(5) The dividends are treated as paid on the shares and by the company referred to in section 617(1) of CTA 2010 (which relates to the trustees of an authorised unit trust being treated as a UK resident company in which the unit holders' rights are shares).
(6) This section does not apply if the authorised unit trust is an approved personal pension scheme.
(7) See section 391 for the interpretation of this section and section 390.
(1) This section applies for determining the date on which dividends are treated as paid under section 389.
(2) The date on which the dividends are treated as paid depends on whether a date is specified by or in accordance with the trust's terms for any distribution for the distribution period in question.
(3) If such a date is so specified, the dividends are treated as paid on that date.
(4) If no such date is so specified, the dividends are treated as paid on the last day of that period.
In sections 389 and 390—
“approved personal pension scheme” has the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of that Act),
“distribution” includes investment on behalf of a unit holder in respect of the holder's accumulation units,
“distribution accounts” means the accounts showing how the total amount available for distribution to unit holders is ascertained, and
“distribution period” means the period by reference to which that amount is ascertained.
(1) Sections 393 to 395 contain special rules about the charge under this Chapter in respect of shares awarded to an individual under a Schedule 2 share incentive plan.
(2) Those sections only apply if condition A or B was met at the time the shares in question were so awarded.
(3) Condition A is that—
(a) the earnings from the eligible employment were general earnings (see section 7(3) of ITEPA 2003) to which any of the charging provisions of Chapter 4 or 5 of Part 2 of ITEPA 2003 applied, or
(b) if there had been any earnings from it, they would have been such earnings.
(4) In subsection (3)—
(a) “the eligible employment” means the employment resulting in the individual meeting the employment requirement in relation to the plan, and
(b) the reference to any of the charging provisions of Chapter 4 or 5 of Part 2 of ITEPA 2003 has the same meaning as it has in the employment income Parts of that Act (see sections 14(3) and 20(3) of that Act).
(5) Condition B is that—
(a) the shares were awarded before 6th April 2003, and
(b) the individual was liable for tax under Schedule E in respect of the relevant employment.
(6) In subsection (5) “the relevant employment” means the employment by reference to which the individual met the requirements in paragraph 14 of Schedule 8 to FA 2000 (employee share ownership plans: the employment requirement) in relation to the plan.
(7) See section 396 for the general interpretation of this section and sections 393 to 395.
393 Later charge where cash dividends retained in SIPs are paid over
(1) This section applies if a cash dividend is paid over to a participant under paragraph 68(4) of Schedule 2 to ITEPA 2003 (cash dividend paid over if not reinvested etc.).
(2) Tax charged under this Chapter is charged for the tax year in which the cash dividend is paid over instead of the tax year in which it was originally paid.
(3) Tax so charged is charged on the amount of the cash dividend paid over.
(4) The person liable for any tax so charged is the participant.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) For the purposes of this Chapter, the question whether a cash dividend paid over to a participant under paragraph 68(4) of Schedule 2 to ITEPA 2003 is a dividend paid by a company that is UK resident is determined by reference to the tax year in which the dividend was originally paid.
394 Distribution when dividend shares cease to be subject to SIP
(1) This section applies if dividend shares cease to be subject to a Schedule 2 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.
(3A) But if the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 65(2) of Schedule 2 to ITEPA 2003 (provision requiring dividend shares to be offered for sale), the amount of the distribution treated as made is the amount equal to the relevant fraction of the market value of the shares at the time they are offered for sale if that amount is less than the amount given by subsection (3).
(3B) For the purposes of subsection (3A) “the relevant fraction” is—
A B
where—
A is so much of the amount of the cash dividend applied to acquire the shares on the participant's behalf as represents a cash dividend paid in respect of plan shares in a UK resident company, and
B is the amount of the cash dividend applied to acquire the shares on the participant's behalf.
(3C) Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares subject to a restriction) applies for the purposes of subsection (3A).
(4) The person liable for any tax charged on the distribution as a result of this section is the participant.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) 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 Schedule 2 share incentive plans, see section 508 of ITEPA 2003.
395 Reduction in tax due in cases within section 394
(1) This section applies if—
(a) a person is liable to tax as a result of section 394, and
(b) any tax is paid on any capital receipts under section 501 of ITEPA 2003 (charge on capital receipts in respect of plan shares) in respect of the shares that cease to be subject to the Schedule 2 share incentive plan.
(2) The tax due is to be reduced by an amount equal to the total tax so paid.
(3) In subsection (2) “the tax due” means the amount of tax due as a result of section 394 ....
(4) For rules identifying shares ceasing to be subject to Schedule 2 share incentive plans, see section 508 of ITEPA 2003.