(1) This section and sections 392 to 395 form part of the SIP code (see section 488 of ITEPA 2003 (... share incentive plans)).
(2) Accordingly, expressions used in this section or those sections and contained in the index in paragraph 100 of Schedule 2 to that Act (... share incentive plans) have the meaning indicated by that index.
(3) In particular—
(a) for the meaning of “award of shares” see paragraph 5(1) of that Schedule,
(b) for the meaning of “ceasing to be subject to plan” see paragraph 97 of that Schedule,
(c) for the meaning of “dividend shares” see paragraph 62(3)(b) of that Schedule,
(d) for the meaning of “employment requirement” see paragraph 15(3) of that Schedule,
(e) for the meaning of “participant” see paragraph 5(4) of that Schedule,
(f) for the meaning of “plan shares” see paragraphs 86 to 88 and 99(1) of that Schedule, and
(g) for the meaning of “shares” see paragraphs 87(6) and 99(2) of that Schedule.
396A Arrangements offering a choice of capital or income return
(1) Subsection (2) applies if a person (“S”) has a choice either—
(a) to receive what would (ignoring this section) be a distribution of a company, or
(b) to receive from that company, or from a third party, anything else (“the alternative receipt”) which—
(i) is of the same or substantially the same value, and
(ii) (ignoring this section) would not be charged to income tax.
(2) If S chooses the alternative receipt—
(a) for income tax purposes it is treated as a distribution made to S by that company in the tax year in which it is received by S, and
(b) for the purposes of sections 1100 to 1103 of CTA 2010 (statements and returns of details of distributions) it is treated as a distribution that—
(i) is so made, and
(ii) is one to which section 1100 of CTA 2010 applies.
(3) For the purposes of this section—
(a) it does not matter if the choice mentioned in subsection (1) is subject to any conditions being met or to the exercise of any power;
(b) where S is offered one thing subject to a right, however expressed, to choose another instead, S is to be regarded as making a choice if S abandons or fails to exercise such a right.
(4) If at any time a tax other than income tax (“the other tax”) is charged in relation to the alternative receipt, in order to avoid a double charge to tax in respect of that receipt, a person may make a claim for one or more consequential adjustments to be made in respect of the other tax.
(5) On a claim under subsection (4) an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.
(6) 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 an enactment.
(1) For the purposes of this Chapter, a distribution made to an individual in respect of share capital in the winding up of a UK resident company is a distribution of the company if—
(a) Conditions A to D are met, and
(b) the distribution is not excluded (see subsection (7)).
(2) Condition A is that, immediately before the winding up, the individual has at least a 5% interest in the company.
(3) Condition B is that the company—
(a) is a close company when it is wound up, or
(b) was a close company at any time in the period of two years ending with the start of the winding up.
(4) Condition C is that, at any time within the period of two years beginning with the date on which the distribution is made—
(a) the individual carries on a trade or activity which is the same as, or similar to, that carried on by the company or an effective 51% subsidiary of the company,
(b) the individual is a partner in a partnership which carries on such a trade or activity,
(c) the individual, or a person connected with him or her, is a participator in a company in which he or she has at least a 5% interest and which at that time—
(i) carries on such a trade or activity, or
(ii) is connected with a company which carries on such a trade or activity, or
(d) the individual is involved with the carrying on of such a trade or activity by a person connected with the individual.
(5) Condition D is that it is reasonable to assume, having regard to all the circumstances, that—
(a) the main purpose or one of the main purposes of the winding up is the avoidance or reduction of a charge to income tax, or
(b) the winding up forms part of arrangements the main purpose or one of the main purposes of which is the avoidance or reduction of a charge to income tax.
(6) The circumstances referred to in subsection (5) include in particular the fact that Condition C is met.
(7) A distribution to an individual is excluded if or to the extent that—
(a) the amount of the distribution does not exceed the amount that would result in no gain accruing for the purposes of capital gains tax, or
(b) the distribution is a distribution of irredeemable shares.
(8) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable;
“effective 51% subsidiary” has the meaning given by section 170(7) of TCGA 1992;
“participator” has the meaning given by section 454 of CTA 2010.
(9) For the purposes of this section, an individual has at least a 5% interest in a company if—
(a) at least 5% of the ordinary share capital of the company is held by the individual, and
(b) at least 5% of the voting rights in the company are exercisable by the individual by virtue of that holding.
(10) For the purposes of subsection (9) if an individual holds any shares in a company jointly or in common with one or more other persons, he or she is to be treated as sole holder of so many of them as is proportionate to the value of his or her share (and as able to exercise voting rights by virtue of that holding).
401 Relief: distribution repaying shares or security issued in earlier distribution
(1) Where a person is liable to income tax on a CD distribution, the person's liability to income tax on a subsequent non-CD distribution is reduced in accordance with this section if the non-CD distribution consists of a repayment of—
(a) the share capital, or
(b) the principal of the security,
which constituted the CD distribution.
(1A) The reduction is—
(a) the amount of income tax to which the person is liable on the CD distribution, or
(b) if lower, the amount of income tax to which the person is liable on the non-CD distribution.
(1B) For the purposes of calculating the amounts mentioned in subsection (1A)(a) and (b) assume—
(a) that the CD distribution is the lowest part of the person's dividend income in the tax year (“year 1”) in which it is made,
(b) that the non-CD distribution, if it is made in year 1, is the part of the person's dividend income in year 1 that is next lowest after the CD distribution, and
(c) that the non-CD distribution, if it is made after year 1, is the lowest part of the person's dividend income in the tax year in which it is made.
(6A) The reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.
(7) In this section—
“CD distribution” means 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) of CTA 2010 (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company),
“non-CD distribution” means a distribution which is not a CD distribution, and
“security” has the meaning given in section 1117(1) of CTA 2010.
401ZA Relief: distributions to trustees of employee-ownership trusts
(1) This section applies where—
(a) there has been a disposal of ordinary share capital of a company (“C”) to the trustees of a settlement,
(b) the relief requirements are met in relation to the disposal,
(c) C has made a payment to the trustees that is a distribution to the trustees chargeable to income tax as a result of this Chapter or Chapter 4 (dividends from non-UK resident companies), and
(d) the payment was made for the purposes of meeting the trustees’ acquisition costs.
(2) On the making of a claim, so much of the trustees’ acquisition costs may be deducted from the distribution (whether chargeable under this Chapter or Chapter 4) as—
(a) does not reduce the amount of the distribution below nil, and
(b) has not been deducted from any other distribution.
(3) The “relief requirements” means the requirements set out in section 236H(4) of TCGA 1992 (disposals to employee-ownership trusts), but those requirements have effect for the purposes of this section as if references to “P” were to the person making the disposal whether or not that person is a company.
(4) For the purposes of this section, the trustees’ acquisition costs are sums expended by the trustees on—
(a) the acquisition of ordinary share capital in C by the trustees that resulted from the disposal;
(b) the repayment of any sums borrowed to fund that acquisition;
(c) the payment of interest on any such sums or in respect of any deferral of consideration for the disposal to the extent the payment is not in respect of interest exceeding a reasonable commercial rate;
(d) any valuation of C carried out in connection with the acquisition;
(e) any liability to stamp duty or stamp duty reserve tax on the acquisition;
(f) such other reasonable expenses as are directly connected with the acquisition (but this does not include any expenses incurred in connection with the ownership of the ordinary share capital once acquired).
(1) An officer of Revenue and Customs may, for the purposes of this Chapter, by notice require any person in whose name any shares or loan capital are registered—
(a) to state whether or not that person is the beneficial owner of the shares or loan capital, and
(b) if that person is not the beneficial owner of the shares or loan capital, to provide the name and address of the person on whose behalf the shares or loan capital are registered in that person's name.
(2) Subsections (3) and (4) apply if a company (“the issuing company”) appears to an officer of Revenue and Customs to be a close company.
(3) The officer may, for the purposes of this Chapter, by notice require the issuing company to provide the officer with—
(a) particulars of any bearer securities issued by the company,
(b) the names and addresses of the persons to whom the securities were issued, and
(c) details of the amounts issued to each person.
(4) The officer may, for the purposes of this Chapter, by notice require—
(a) any person to whom bearer securities were issued by the company, or
(b) any person to or through whom bearer securities issued by the company were subsequently sold or transferred,
to provide any further information that the officer reasonably requires with a view to enabling the officer to find out the names and addresses of the persons beneficially interested in the securities.
(5) In this section—
“loan creditor” has the meaning given by section 453 of CTA 2010, and
“securities” includes—
shares, stocks, bonds, debentures and debenture stock, and
any promissory note or other instrument evidencing indebtedness to a loan creditor of the company.
(1) This section applies if—
(a) an individual is temporarily non-resident,
(b) a relevant distribution is made or treated as made to the individual in the temporary period of non-residence,
(c) the tax year in which it is made or treated as made (“the distribution year”) is a tax year for which the individual is UK resident, and
(d) the amount of income tax charged on the distribution under this Chapter is less than it would have been if the existence of double taxation relief arrangements were disregarded.
(2) Subsections (3) and (4) have effect in cases where the distribution year is not the year of return.
(3) The total income (see Step 1 of the calculation in section 23 of ITA 2007) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount on which tax would be charged under this Chapter in respect of the distribution disregarding any double taxation relief arrangements.
(4) But the notional UK tax on that distribution is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23.
(5) If the distribution year is the year of return, the tax charged under this Chapter in respect of the relevant distribution is to be charged and assessed without regard to the existence of double taxation relief arrangements.
(6) For the purposes of this section, a dividend or other distribution is a “relevant distribution” if—
(a) it is a dividend or other distribution of a close company, and
(b) it is made or treated as made to the individual because the individual was at a relevant time—
(i) a material participator in the company, or
(ii) an associate of a material participator in the company.
(6A) Where—
(a) a company (“company A”) makes a payment (including by way of a loan) to the individual in the temporary period of non-residence,
(b) the individual is, at a relevant time, a material participator in, or is an associate of a material participator in, another company that is a close company (“company B”),
(c) at the time the payment is made, company B controls (within the meaning of sections 450 and 451 of CTA 2010) company A, and
(d) it is reasonable to suppose that the making of that payment is intended to avoid an amount being received by the individual by way of relevant distribution made, or treated as made, by company B,
company A is to be treated as making a relevant distribution of that amount to the individual in that period.
(6B) Where—
(a) a company makes a payment (including by way of a loan) to any person other than the individual at any time in the temporary period of non-residence,
(b) if the company had made a dividend to the individual at that time, it would have been a relevant distribution, and
(c) the individual receives an amount or a benefit (“the relevant receipt”) as a result of arrangements that it is reasonable to suppose are intended to secure that—
(i) the individual receives the benefit of the payment or any part of it, but
(ii) without a relevant distribution having been made, or treated as made, to the individual in that period,
the company is to be treated as making a relevant distribution to the individual in that period in the amount of the value of the relevant receipt.
(6C) For the purposes of subsection (6B)(c) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(6D) Where tax of a similar character to income tax is payable by the individual under the law of a territory outside the United Kingdom on a relevant distribution—
(a) credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the relevant distribution, and
(b) the credit is to be given effect by treating the amount of the relevant distribution as reduced to such amount as would secure that so much of the credit is given as does not exceed the income tax chargeable in respect of the relevant distribution.
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10) The “notional UK tax” on the relevant distribution is so much of the income tax paid by the individual for the distribution year as is attributable on a just and reasonable basis to the relevant distribution.
(11) If section 393 applies, references in this section to a distribution being made to the individual are to a cash dividend being paid over to the individual.
(12) In this section—
“associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454);
“material participator” means a participator who has a material interest in the company, as defined in section 457 of that Act;
“relevant time” means—
any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
any time in one or more of the 3 tax years preceding that year;
...
402 Charge to tax on dividends from non-UK resident companies
(1) Income tax is charged on dividends of a non-UK resident company.
(2) For exemptions, see in particular section 770 (amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment).
(3) Subsection (1) is also subject to 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 dividends of a capital nature.
(1) Tax is charged under this Chapter on the ... amount of the dividends arising in the tax year.
(2) Subsection (1) is subject to—
section 406(2) and (3) (later charge where cash dividends retained in SIPs are paid over),
section 407(3) (dividend payment when dividend shares cease to be subject to SIP), and
Part 8 (foreign income: special rules).
(1) The person liable for any tax charged under this Chapter is the person receiving or entitled to the dividends.
(2) Subsection (1) is subject to—
section 406(4) (later charge where cash dividends retained in SIPs are paid over), and
section 407(4) (dividend payment when dividend shares cease to be subject to SIP).
(1) For the purposes of this Chapter, a distribution made to an individual in respect of share capital in a winding up of a non-UK resident company is a dividend of the company if—
(a) Conditions A to D are met, and
(b) the distribution is not excluded (see subsection (7)).
(2) Condition A is that, immediately before the winding up, the individual has at least a 5% interest in the company.
(3) Condition B is that the company—
(a) is a close company when it is wound up, or
(b) was a close company at any time in the period of two years ending with the start of the winding up.
(4) Condition C is that, at any time within the period of two years beginning with the date on which the distribution is made—
(a) the individual carries on a trade or activity which is the same as, or similar to, that carried on by the company or an effective 51% subsidiary of the company,
(b) the individual is a partner in a partnership which carries on such a trade or activity,
(c) the individual, or a person connected with him or her, is a participator in a company in which he or she has at least a 5% interest and which at that time—
(i) carries on such a trade or activity, or
(ii) is connected with a company which carries on such a trade or activity, or
(d) the individual is involved with the carrying on of such a trade or activity by a person connected with the individual.
(5) Condition D is that it is reasonable to assume, having regard to all the circumstances, that—
(a) the main purpose or one of the main purposes of the winding up is the avoidance or reduction of a charge to income tax, or
(b) the winding up forms part of arrangements the main purpose or one of the main purposes of which is the avoidance or reduction of a charge to income tax.
(6) The circumstances referred to in subsection (5) include in particular the fact that Condition C is met.
(7) A distribution to an individual is excluded if or to the extent that—
(a) the amount of the distribution does not exceed the amount that would result in no gain accruing for the purposes of capital gains tax, or
(b) the distribution is a distribution of irredeemable shares.
(8) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable;
“close company” includes a company which would be a close company if it were a UK resident company;
“effective 51% subsidiary” has the meaning given by section 170(7) of TCGA 1992;
“participator” has the meaning given by section 454 of CTA 2010.
(9) For the purposes of this section, a person has at least a 5% interest in a company if—
(a) at least 5% of the ordinary share capital of the company is held by the individual, and
(b) at least 5% of the voting rights in the company are exercisable by the individual by virtue of that holding.
(10) For the purposes of subsection (9) if an individual holds any shares in a company jointly or in common with one or more other persons, he or she is to be treated as sole holder of so many of them as is proportionate to the value of his or her share (and as able to exercise voting rights by virtue of that holding).
(1) Sections 406 to 408 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 the condition in section 392(3) or (5) was met at the time the shares in question were so awarded (earnings within ITEPA 2003).
(3) This section and sections 406 to 408 form part of the SIP code (see section 488 of ITEPA 2003 (... share incentive plans)).
(4) Accordingly, expressions used in this section or those sections and contained in the index in paragraph 100 of Schedule 2 to that Act (... share incentive plans) have the meaning indicated by that index.
(5) In particular—
(a) for the meaning of “award of shares” see paragraph 5(1) of that Schedule,
(b) for the meaning of “ceasing to be subject to plan” see paragraph 97 of that Schedule,
(c) for the meaning of “dividend shares” see paragraph 62(3)(b) of that Schedule,
(d) for the meaning of “participant” see paragraph 5(4) of that Schedule,
(e) for the meaning of “plan shares” see paragraphs 86 to 88 and 99(1) of that Schedule, and
(f) for the meaning of “shares” see paragraphs 87(6) and 99(2) of that Schedule.
406 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 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.
(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) For the purposes of this Chapter, the question whether a cash dividend so paid over is a dividend paid by a company that is non-UK resident is determined by reference to the tax year in which the dividend was originally paid.
407 Dividend payment when dividend shares cease to be subject to SIP
(1) This section applies if dividend shares cease to be subject to a Schedule 2 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 dividend is treated as paid to the participant in the tax year in which the shares cease to be subject to the plan.
(3) The amount of the dividend treated as paid 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 non-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 dividend treated as paid 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 non-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 as a result of this section is the participant.
(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) For rules identifying shares ceasing to be subject to Schedule 2 share incentive plans, see section 508 of ITEPA 2003.
408 Reduction in tax due in cases within section 407
(1) This section applies if—
(a) a person is liable for tax as a result of section 407, 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 as a result of section 407 is to be reduced by an amount equal to the total tax so paid.
(2A) In subsection (2) “the tax due” means the amount of tax due as a result of section 407 ....
(3) For rules identifying shares ceasing to be subject to Schedule 2 share incentive plans, see section 508 of ITEPA 2003.
(1) This section applies if an individual is temporarily non-resident.
(2) Dividends within subsection (3) are to be treated for the purposes of this Chapter as if they were received by the individual, or as if the individual became entitled to them, in the period of return.
(3) A dividend is within this subsection if—
(a) the individual receives or becomes entitled to it in the temporary period of non-residence,
(b) it is a dividend of a company that would be a close company if the company were UK resident,
(c) the individual receives or becomes entitled to it by virtue of being at a relevant time—
(i) a material participator in the company, or
(ii) an associate of a material participator in the company, and
(d) ignoring this section, the individual—
(i) is not liable for tax under this Chapter in respect of the dividend, but
(ii) would have been so liable if the individual had received the dividend, or become entitled to it, in the period of return.
(4) For the purposes of subsection (3)—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) paragraph (d)(i) includes a case where the individual could be relieved of liability on the making of a claim under section 6 of TIOPA 2010 (double taxation relief), even if no claim is in fact made.
(4A) Where—
(a) a company (“company A”) makes a payment (including by way of a loan) to the individual in the temporary period of non-residence,
(b) the individual is, at a relevant time, a material participator in, or an associate of a material participator in, another company (“company B”) that would be a close company if it were UK resident,
(c) at the time the payment was made, company B controls (within the meaning of sections 450 and 451 of CTA 2010) company A, and
(d) it is reasonable to suppose that the making of that payment is intended to avoid—
(i) an amount being received by the individual by way of dividend that falls within subsection (3)(c), or
(ii) the individual becoming entitled to such a dividend,
the individual is to be treated as having received, at that time, a dividend in that amount that falls within subsection (3)(b) and (c).
(4B) Where—
(a) a company makes a payment (including by way of a loan) to any person other than the individual in the temporary period of non-residence,
(b) if the company had made a dividend to the individual at that time, it would have been a dividend within subsection (3), and
(c) the individual receives an amount or a benefit (“the relevant receipt”) as a result of arrangements that it is reasonable to suppose are intended to secure that—
(i) the individual receives the benefit of the payment or any part of it, but
(ii) without the individual receiving, or becoming entitled to, a dividend that falls within subsection (3)(c),
the individual is to be treated as having received, in that period, a dividend in the amount of the value of the relevant receipt, that falls within subsection (3)(b) and (c).
(4C) For the purposes of subsection (4B)(c) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(4D) Where tax of a similar character to income tax is payable by the individual under the law of a territory outside the United Kingdom on a dividend within subsection (3)—
(a) credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the dividend, and
(b) the credit is to be given effect by treating the amount of the dividend as reduced to such amount as would secure that so much of the credit is given as does not exceed the income tax chargeable in respect of the dividend.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) If section 406 or 407 applies, references in this section to a dividend being received by the individual are to a cash dividend being paid over to the individual or (as the case may be) a dividend being treated as paid to the individual.
(10) In this section—
(a) “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454),
(b) a “material participator” is a participator who has a material interest in the company, as defined in section 457 of that Act,
(c) “relevant time” means—
(i) any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
(ii) any time in one or more of the 3 tax years preceding that year.
(1) Income tax is charged on stock dividend income.
(2) In this Chapter “stock dividend income” means the income that is treated as arising under section 410.
(1) This section applies to—
(a) share capital issued by a UK resident company in lieu of a cash dividend, and
(b) bonus share capital issued by a UK resident company in respect of shares in the company of a qualifying class.
(1A) For the purposes of subsection (1)(b), shares are of a qualifying class if—
(a) shares of that class carry the right to receive bonus share capital in the company (of the same or a different class), and
(b) that right is conferred by the terms on which shares of that class were originally issued or by those terms as subsequently extended or otherwise varied.
(2) If an individual is beneficially entitled to that share capital, income is treated as arising to the individual.
(3) If—
(a) the share capital is issued to trustees in respect of shares they hold in the company (alone or with others), and
(b) a cash dividend paid to them in respect of the shares would have been to any extent accumulated or discretionary income (as defined in section 480 of ITA 2007 but excluding income arising under a charitable trust or an unauthorised unit trust in relation to which regulation 12 of the Unauthorised Unit Trusts (Tax) Regulations 2013 applies) ,
income is treated as arising to the trustees.
(4) If the share capital is issued to personal representatives during the administration period, income is treated as arising (but see section 413(4)).
(5) In subsection (4) “administration period” has the meaning given by section 653.
(6) Income within this section is treated as arising on the earliest date on which the company is required to issue the share capital in question.
(7) See section 413(5) (apportionment) if two or more persons are entitled to the share capital.
(8) There are special rules in paragraph 78A of Schedule 2 for share capital issued in respect of shares issued before 6 April 1975.
(1) This section applies if bonus share capital falling within section 410(1)(b) is converted into, or exchanged for, shares in the company of a different class.
(2) Section 410 does not apply to any shares in the company issued—
(a) in connection with the conversion or exchange, and
(b) in consideration of the cancellation, extinguishment or acquisition by the company of the bonus share capital.
(1) Tax is charged under this Chapter on the amount of stock dividend income treated for income tax purposes as arising in the tax year.
(2) That amount is the cash equivalent of the share capital on the issue of which the stock dividend income arises (see section 412)....
(1) The cash equivalent of share capital issued as mentioned in section 410(1)(a) is the amount of the cash dividend alternative (see section 414A(2)).
(2) But if the difference between the cash dividend alternative and the share capital's market value equals or exceeds 15% of that market value—
(a) subsection (1) does not apply, and
(b) the cash equivalent of the share capital is its market value.
(3) The cash equivalent of share capital issued as mentioned in section 410(1)(b) is its market value.
(4) For the purposes of this section, market value is determined—
(a) in the case of listed share capital, on the date of first dealing, and
(b) in the case of other share capital, on the earliest date on which the company is required to issue it.
(5) In this section—
“listed” means listed in the Stock Exchange Daily Official List, and
“market value” has the same meaning as in sections 272(1) and (3) and 273(3) of TCGA 1992.
(1) The person liable for any tax charged under this Chapter is the person indicated by this section.
(2) If section 410(2) applies, the individual is liable for the tax.
(3) If section 410(3) applies, the trustees are liable for the tax.
(4) If section 410(4) applies, tax is not charged under this Chapter, but see—
(a) section 664 (under which the income treated as arising to the personal representatives under section 410 is treated as part of the aggregate income of the estate for the purposes of Chapter 6 of Part 5), and
(b) section 947 of CTA 2009 (under which similar provision is made for the purposes of Chapter 3 of Part 10 of that Act).
(5) If two or more persons are entitled to the share capital on the issue of which the stock dividend income arises, this Chapter applies as if the company issuing it had issued to each of those persons a proportionate part of the share capital.
(6) In subsection (5) “proportionate part” means a part proportionate to the person's interest on the earliest date on which the company is required to issue the share capital.
(1) This section applies if—
(a) an individual is temporarily non-resident,
(b) relevant stock dividend income is treated under this Chapter as arising to the individual in the temporary period of non-residence,
(c) the tax year in which it is treated as arising (“the arising year”) is a tax year for which the individual is UK resident, and
(d) the amount of income tax charged on the relevant stock dividend income under this Chapter is less than it would have been if the existence of double taxation relief arrangements were disregarded.
(2) Subsections (3) and (4) have effect in cases where the arising year is not the year of return.
(3) The total income (see Step 1 of the calculation in section 23 of ITA 2007) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount on which tax would be charged under this Chapter in respect of the relevant stock dividend income disregarding any double taxation relief arrangements.
(4) But the notional UK tax on that relevant stock dividend income is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23.
(5) If the arising year is the year of return, the tax charged under this Chapter in respect of the relevant stock dividend income is to be charged and assessed without regard to the existence of double taxation relief arrangements.
(6) Stock dividend income is “relevant stock dividend income” if—
(a) the UK resident company that issues the share capital or bonus share capital is a close company, and
(b) the individual is beneficially entitled to that share capital or bonus share capital by virtue of being at a relevant time—
(i) a material participator in the company, or
(ii) an associate of a material participator in the company.
(6A) Where—
(a) a company (“company A”) makes a payment (including by way of a loan) to the individual in the temporary period of non-residence,
(b) the individual is, at a relevant time, a material participator in, or is an associate of a material participator in, another company that is a close company (“company B”),
(c) at the time the payment was made, company B controls (within the meaning of sections 450 and 451 of CTA 2010) company A, and
(d) it is reasonable to suppose that the making of that payment is intended to avoid an amount of relevant stock dividend income being treated under this Chapter as arising to the individual in that period,
relevant stock dividend income in that amount is treated as arising to the individual in that period.
(6B) Where—
(a) a company makes a payment (including by way of a loan) to any person other than the individual at any time in the temporary period of non-residence,
(b) if the company had issued share capital in lieu of a cash dividend shares at that time that the individual is beneficially entitled to, relevant stock dividend income would have been treated under this Chapter as arising to the individual in that period, and
(c) the individual receives an amount or a benefit (“the relevant receipt”) as a result of arrangements that it is reasonable to suppose are intended to secure that—
(i) the individual receives the benefit of the payment or any part of it, but
(ii) without relevant stock dividend income in that amount being treated under this Chapter as arising to the individual in that period,
relevant stock dividend income in amount of the value of the relevant receipt is treated as arising to the individual in that period.
(6C) For the purposes of subsection (6B)(c) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(6D) Where tax of a similar character to income tax is payable by the individual under the law of a territory outside the United Kingdom on relevant stock dividend income—
(a) credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the relevant stock dividend income, and
(b) the credit is to be given effect by treating the amount of the relevant stock dividend income as reduced to such amount as would secure that so much of the credit is given as does not exceed the income tax chargeable in respect of the relevant stock dividend income.
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10) The “notional UK tax” on the relevant stock dividend income is so much of the income tax paid by the individual for the arising year as is attributable on a just and reasonable basis to that income.
(11) In this section—
“associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454);
“material participator” means a participator who has a material interest in the company, as defined in section 457 of that Act;
“relevant time” means—
any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
any time in one or more of the 3 tax years preceding that year;
...
(1) In this Chapter “bonus share capital” means—
(a) share capital issued otherwise than wholly for new consideration, or
(b) the part (if there is such a part) of any share capital so issued that is not properly referable to new consideration.
(2) For the purposes of this Chapter share capital is issued by a company in lieu of a cash dividend if—
(a) it is issued in consequence of the exercise by any person of an option conferred on the person, and
(b) that option is an option to receive, in respect of shares in the company, either a dividend in cash or additional share capital.
(3) For the purposes of subsection (2), an option to receive either a dividend in cash or additional share capital is conferred on a person not only—
(a) if the person is required to choose one or the other, but also
(b) if the person is offered the one subject to a right, however expressed, to choose the other instead.
(4) The reference in subsection (2) to a person's exercise of an option includes a person's abandonment of, or failure to exercise, a right such as is mentioned in subsection (3)(b).
(5) In this Chapter “share” includes stock, and any other interest of a member in a company.
(6) If two or more companies enter into arrangements to make distributions to each other's members, all parties concerned (however many) may, for the purposes of this Chapter, be treated as if anything done by any one of those companies had been done by any one of the others.
(7) The following apply in relation to this Chapter as they apply in relation to Part 23 of CTA 2010—
(a) section 1113 (“in respect of shares”) of CTA 2010,
(b) section 1115 (“new consideration”) of CTA 2010.
(1) Income tax is charged if—
(a) a company is or was chargeable to tax under section 455 of CTA 2010 (loans to participators in close companies etc.) in respect of a loan or advance, and
(b) the company releases or writes off the whole or part of the debt in respect of the loan or advance.
(2) Subsection (1) is subject to section 418 (relief where borrowers liable as settlors).
(3) Subsection (4) applies if, as a result of section 460 of CTA 2010, sections 455 to 459 of that Act have effect as if a loan or advance had been made by a company (“A”), rather than the company (“B”) which—
(a) actually made it,
(b) is regarded as having made it under section 455(4) of that Act (deemed loans where debt incurred or assigned to close company), or
(c) would be so regarded if it were a close company.
(4) If the whole or part of the debt is released or written off by B, for the purposes of subsection (1), A rather than B is treated as releasing it or writing it off.
(5) Expressions used in this Chapter have the same meanings as they have for the purposes of section 455 of CTA 2010 .
(1) Tax is charged under this Chapter on the ... amount of the debt released or written off in the tax year.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) For the purposes of calculating the total income of the person liable for the tax, the amount charged is treated as income.
(4) This section is subject to section 418 (relief where borrowers liable as settlors).
(1) The person liable for any tax charged under this Chapter is—
(a) in the case of a loan or advance made to a partnership, any partner who is an individual, and
(b) in any other case, the person to whom the loan or advance was made.
(1A) If more than one person is liable in a case within subsection (1)(a), the liability is to be apportioned between them in a just and reasonable manner.
(2) This is subject to—
section 419 (loans and advances to persons who die), and
section 420 (loans and advances to trustees of trusts that have ended).
(1) Relief is given under this section if the person to whom the loan or advance was made—
(a) is liable for the tax year for income tax on a sum in respect of it under Chapter 5 of Part 5 as a result of section 633 (capital sums paid to settlor by trustees of settlement), or
(b) has been so liable for any previous tax year.
(2) If the total amount previously charged (see subsection (4)) equals or exceeds the total amount released (see subsection (6)), tax is not charged under this Chapter.
(3) If the total amount released exceeds the total amount previously charged, tax is charged under this Chapter on the excess....
(4) In this section “the total amount previously charged” means the total of—
(a) the sums included in the person's income under section 633 in respect of the loan or advance for the tax year or for previous tax years, and
(b) the amounts charged under this Chapter in respect of the loan or advance for previous tax years.
(5) For the purposes of subsection (4)(a), section 640(1) (which requires the grossing up of the sums treated as paid to the settlor by reference to the trust rate) is ignored.
(6) In this section “the total amount released” means the total amount released or written off in respect of the loan or advance in the tax year and previous tax years.
(1) This section applies if—
(a) a loan or advance is made to a person who dies,
(b) a company is or was chargeable to tax under section 455 of CTA 2010 (charge to tax in case of loan to participator) in respect of the loan or advance, and
(c) after the death the company releases or writes off the whole or part of the debt in respect of the loan or advance.
(2) Tax is not charged under this Chapter if at the time of the release or writing off the debt is due from the person's personal representatives in that capacity, but see—
(a) section 664 (under which the amount that would be so charged is treated as part of the aggregate income of the estate for the purposes of Chapter 6 of Part 5), and
(b) section 947 of CTA 2009 (under which similar provision is made for the purposes of Chapter 3 of Part 10 of that Act).
(3) If subsection (2) does not apply, tax is charged under this Chapter on the person from whom the debt is due at the time of release or writing off.