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Chapter SAIM5130

Document Cited in Related
Vincent
Published date19 March 2016
Record NumberSAIM5130
CourtHM Revenue & Customs
Non-qualifying distributions did not carry tax credit: tax years up to 2015-16

ITTOIA05/S400, which was repealed by FA16/S5 and SCH1 for tax years after 2015-16, applied when a person received a non-qualifying distribution, see SAIM5050. A non-qualifying distribution did not carry a tax credit.

The recipient of the non-qualifying distribution was treated as having paid income tax at the dividend ordinary rate (SAIM1080) on the actual amount of the non-qualifying distribution (so there was no grossing up).

In the case of trustees of accumulation or discretionary trusts, the trustees were taxed on the amount or value of the distribution at the dividend trust rate. However, the trustees’ tax liability was reduced by an amount of income tax equivalent to the dividend ordinary rate.

Continuing relief: distribution repaying shares or security issued in earlier distribution

A non-qualifying distribution was generally the first part of an event that would eventually be a qualifying distribution. Thus the issue of redeemable share capital (unless a stock dividend) was a non-qualifying distribution (see CTA10/S1136 (1)(a)) but the repayment of that share capital was a qualifying distribution (SAIM5050). ITTOIA05/S401 provides relief to avoid double taxation for a higher rate taxpayer. This provision is maintained for 2016-17 onwards but amended and applies to a subsequent (renamed) ‘non-CD distribution’ that would formerly have been a qualifying distribution for the purpose of granting relief in recognition of an earlier ‘CD distribution’, formerly known as a non-qualifying distribution.

In its original form, the section (“relief: qualifying distribution after linked non-qualifying...

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