Office of Public Sector Information
(1) This Part imposes charges to income tax under—
(a) Chapter 2 (interest),
(b) Chapter 3 (dividends etc. from UK resident companies etc.),
(c) Chapter 4 (dividends from non-UK resident companies),
(d) Chapter 5 (stock dividends from UK resident companies),
(e) Chapter 6 (release of loan to participator in close company),
(f) Chapter 7 (purchased life annuity payments),
(g) Chapter 8 (profits from deeply discounted securities),
(h) Chapter 9 (gains from contracts for life insurance etc.),
(i) Chapter 10 (distributions from unauthorised unit trusts),
(j) Chapter 11 (transactions in deposits),
(k) Chapter 12 (disposals of futures and options involving guaranteed returns), and
(l) Chapter 13 (sales of foreign dividend coupons).
(2) Part 6 deals with exemptions from the charges under this Part.
(3) See, in particular, any exemptions mentioned in the particular Chapters.
(4) The charges under this Part apply to non-UK residents as well as UK residents but this is subject to section 368(2) (charges on non-UK residents only on UK source income).
(5) This section needs to be read with the relevant priority rules (see sections 2 and 366).
(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) or 379 (industrial and provident society payments), and
(b) Chapter 3,
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.
(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).
(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 379 (industrial and provident society payments),
section 380 (funding bonds), 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 756 (interest arising from repayment supplements, tax reserve certificates, damages for personal injury, employees' share schemes, repayments of student loans, the redemption of funding bonds and interest on certain foreign currency securities), and
(f) sections 757 to 767 (interest and royalty payments).
(4) Subsection (1) is also subject to sections 714(5), 716(4) and 720(7) of ICTA (exemptions for interest on securities within the accrued income scheme).
(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).
The person liable for any tax charged under this Chapter is the person receiving or entitled to the interest.
(1) Any dividend paid by a building society is treated as interest for the purposes of this Act.
(2) In this section “dividend” has the meaning given by regulations made under section 477A(1) of ICTA (building societies: regulations for the deduction of tax).
(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 subsections (6) and (7).
(3) For income tax purposes payments of yearly interest are treated as made to the owners of the shares by the company.
(4) Subsection (3) is subject to the qualifications in section 468L(4) of ICTA (which modifies the obligation for a person by or through whom a payment of interest is made to deduct tax under section 349(2) of ICTA in the case of interest distributions within that subsection).
(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) This section only applies if the condition in section 468L(1A) of ICTA (the qualifying investments test) is met throughout the distribution period.
(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.
(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 same meaning as in section 468 of that Act (see section 468(18), as so inserted).
(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 subsections (6) and (7).
(3) For income tax purposes payments of yearly interest are treated as made to the unit holders.
(4) Subsection (3) is subject to the qualifications in section 468L(4) of ICTA (which modifies the obligation for a person by or through whom a payment of interest is made to deduct tax under section 349(2) of ICTA in the case of interest distributions within that subsection).
(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) This section only applies if the condition in section 468L(1A) of ICTA (the qualifying investments test) is met throughout the distribution period.
(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.
(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) Any dividend, bonus or other sum payable to a shareholder in—
(a) a registered industrial and provident 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 industrial and provident society” means a society registered or treated as registered under the Industrial and Provident Societies Act 1965 (c. 12) or the Industrial and Provident Societies Act (Northern Ireland) 1969 (c. 24 (N.I.)), 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.
(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—
(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), and
(c) makes special provision where the charge is in respect of shares awarded under an approved share incentive plan (see sections 392 to 396).
(2) This Chapter also makes provision about tax credits, 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 397 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).
(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) See also section 398 (under which the amount or value of the dividends or other distributions is treated as increased if any person is entitled to a tax credit in respect of them).
(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) and 389(3)), 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).
(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 same meaning as in section 468 of that Act (see section 468(18), as so inserted).
(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 468(1) of ICTA (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 an approved 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.
(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) For the purposes of determining—
(a) whether the participant is entitled to a tax credit under section 397 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 dividend is paid over.
(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.
Income Tax (Trading and Other Income) Act 2005