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39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 4

Distributions out of certain exempt profits or gains or out of certain relieved income

Distributions out of profits or gains from stallion fees, stud greyhound services fees and occupation of certain woodlands.

[CTA76 s93; FA96 s25(3); FA97 s146(1) and Sch9 par10(3)]

140. —(1) In this section—

exempt profits” means profits or gains which by virtue of section 231 , 232 or 233 were not charged to tax;

other profits” includes a dividend or other distribution of a company resident in the State, but does not include a distribution to which subsection (3)(a)(i) applies.

(2) Where a distribution for an accounting period is made by a company in part out of exempt profits and in part out of other profits, the distribution shall be treated as if it consisted of 2 distributions respectively made out of exempt profits and out of other profits.

(3) (a) So much of any distribution as has been made out of exempt profits—

(i) shall, where the recipient of that distribution is a company, be deemed for the purposes of the Corporation Tax Acts to be exempt profits of the company, and

(ii) shall not be regarded as income for any purpose of the Income Tax Acts.

(b) Notwithstanding section 136 , the recipient of any distribution, including part of a distribution treated under subsection (2) as a distribution, made out of exempt profits shall not be entitled to a tax credit in respect of that distribution.

(4) (a) Where a company makes a distribution, including part of a distribution treated under subsection (2) as a distribution, in respect of any right or obligation to which section 139 relates and the distribution is made out of exempt profits, the company shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (3)(b) had not been enacted.

(b) Subsection (2) shall apply to a supplementary distribution under this subsection as if that supplementary distribution were a distribution made wholly out of exempt profits.

(5) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (2) as a distribution, made by a company out of exempt profits, section 152 shall apply to the company so that the statements provided for by that section shall show as respects each such distribution, in addition to the particulars required to be given apart from this section, that the distribution is made out of exempt profits.

(6) In relation to any supplementary distribution under subsection (4), section 152 shall apply to the company so that the statement required by subsection (1) of that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(7) Where a company makes a distribution for an accounting period, the distribution shall be regarded for the purposes of this section as having been made out of the distributable income (within the meaning of section 144 (8)) of that period to the extent of that income and, in relation to the excess of the distribution over that income, out of the most recently accumulated income.

(8) Subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for the purposes of that section.

Distributions out of income from patent royalties.

[CTA76 s170; FA92 s19(2); FA96 s32(2) and (3)(b); FA97 s146(1) and Sch9 par10(9)]

141. —(1) In this section—

disregarded income” means—

(a) as respects distributions made out of specified income accruing to a company on or after the 28th day of March, 1996—

(i) income from a qualifying patent which by virtue of section 234(2) has been disregarded for the purposes of income tax, and

(ii) income from a qualifying patent which by virtue of section 234(2) and section 76 (6) has been disregarded for the purposes of corporation tax,

but does not include income (in this section referred to as “specified income”) from a qualifying patent (within the meaning of section 234) which would not be income from a qualifying patent if paragraph (a) of the definition of “income from a qualifying patent” in section 234(1) had not been enacted, and

(b) as respects any other distributions—

(i) income which by virtue of section 234(2) has been disregarded for the purposes of income tax, and

(ii) income which by virtue of section 234(2) and section 76 (6) has been disregarded for the purposes of corporation tax;

eligible shares”, in relation to a company, means shares forming part of the ordinary share capital of the company which—

(a) are fully paid up,

(b) carry no present or future preferential right to dividends or to the company's assets on its winding up and no present or future preferential right to be redeemed, and

(c) are not subject to any different treatment from the treatment which applies to all shares of the same class, in particular different treatment in respect of—

(i) the dividend payable,

(ii) repayment,

(iii) restrictions attaching to the shares, or

(iv) any offer of substituted or additional shares, securities or rights of any description in respect of the shares;

other profits” includes a dividend or other distribution of a company resident in the State, but does not include a distribution to which subsection (3)(a)(ii) applies.

(2) Where a distribution for an accounting period is made by a company in part out of disregarded income and in part out of other profits, the distribution shall be treated as if it consisted of 2 distributions respectively made out of disregarded income and out of other profits.

(3) (a) So much of any distribution as has been made out of disregarded income—

(i) shall, subject to subsection (4)(a), not be regarded as income for any purpose of the Income Tax Acts, and

(ii) shall, where the recipient of that distribution is a company and the distribution is in respect of eligible shares, be deemed for the purposes of this section to be disregarded income.

(b) The recipient of any distribution, including part of a distribution treated under subsection (2) as a distribution, made out of disregarded income shall not be entitled to a tax credit in respect of that distribution.

(4) (a) Subsection (3)(a)(i) shall not apply to any distribution received by a person unless it is a distribution—

(i) in respect of eligible shares, or

(ii) made out of disregarded income, being income (in this subsection referred to in relation to a person as “relevant income”) which is referable to a qualifying patent in relation to which the person carried out, either solely or jointly with another person, the research, planning, processing, experimenting, testing, devising, designing, development or other similar activity leading to the invention which is the subject of the qualifying patent.

(b) For the purposes of paragraph (a), where a distribution for an accounting period is made by a company to a person in part out of relevant income, in relation to the person, and in part out of other disregarded income, the distribution shall be treated as if it consisted of 2 distributions respectively made out of relevant income and out of other disregarded income.

(5) (a) In this subsection—

the amount of aggregate expenditure on research and development incurred by a company in relation to an accounting period” means the amount of expenditure on research and development activities incurred in the State by the company in the accounting period and the previous 2 accounting periods; but, where in an accounting period a company incurs expenditure on research and development activities and not less than 75 per cent of that expenditure was incurred in the State, all of that expenditure shall be deemed to have been incurred in the State;

the amount of the expenditure on research and development activities”, in relation to expenditure incurred by a company in an accounting period, means non-capital expenditure incurred by the company, being the aggregate of the amounts of—

(i) such part of the emoluments paid by the company to employees of the company engaged in carrying out research and development activities related to the company's trade as is laid out for the purposes of those activities,

(ii) expenditure incurred by the company on materials or goods used solely by the company in the carrying out of research and development activities related to the company's trade, and

(iii) a sum paid to another person, not being a person connected with the company, in order that such person may carry out research and development activities related to the company's trade,

but, where the company (in this definition referred to as “the first company”) is a member of a group, then, for the purposes of this section, the amount of expenditure on research and development activities incurred in an accounting period by another company which in the accounting period is a member of the group shall, on a joint election in writing being made on that behalf by the first company and the other company, be treated as being expenditure incurred on research and development activities in the accounting period by the first company and not by the other company;

research and development activities” has the same meaning as in section 766 .

(b) For the purpose of this subsection—

(i) 2 companies shall be deemed to be members of a group if both companies are wholly or mainly under the control of the same individual or individuals or if one company is a 75 per cent subsidiary of another company or both companies are 75 per cent subsidiaries of a third company and, in determining whether one company is a 75 per cent subsidiary of another company, the other company shall be treated as not being the owner of—

(I) any share capital which it owns directly in a company if a profit on sale of the shares would be treated as a trading receipt of its trade, or

(II) any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt;

(ii) a company shall be wholly or mainly under the control of an individual or individuals if not less that 75 per cent of the ordinary share capital of the company is owned directly or indirectly by the individual or, as the case may be, by individuals each of whom owns directly or indirectly part of that share capital;

(iii) sections 412 to 418 shall apply for the purposes of this paragraph as they apply for the purposes of Chapter 5 of Part 12 and, where 2 companies are deemed to be members of a group by reason that both companies are wholly or mainly under the control of the same individual or individuals, those sections shall apply as they would apply for the purposes of that Chapter if the references in those sections to a parent company included a reference to an individual or individuals who hold shares in a company.

(c) Where for an accounting period a company makes one or more distributions out of specified income which accrued to the company on or after the 28th day of March, 1996, so much of the amount of that distribution, or the aggregate of such distributions, as does not exceed the amount of aggregate expenditure on research and development incurred by the company in relation to the accounting period shall be treated as a distribution made out of disregarded income.

(d) (i) Notwithstanding paragraph (c) but subject to subparagraph (ii), if in an accounting period the beneficial recipient (in this paragraph referred to as “the recipient”) of the specified income shows in writing to the satisfaction of the Revenue Commissioners that the specified income is income from a qualifying patent in respect of an invention which—

(I) involved radical innovation, and

(II) was patented for bona fide commercial reasons and not primarily for the purpose of avoiding liability to taxation,

the Revenue Commissioners shall, after consideration of any evidence in relation to the matter which the recipient submits to them and after such consultations (if any) as may seem to them to be necessary with such persons as in their opinion may be of assistance to them, determine whether all distributions made out of specified income accruing to the recipient for that accounting period and all sub sequent accounting periods shall be treated as distributions made out of disregarded income and the recipient shall be notified in writing of the determination.

(ii) A recipient aggrieved by a determination of the Revenue Commissioners under subparagraph (i) may, by notice in writing given to the Revenue Commissioners within 30 days of the date of notification advising of the determination, appeal to the Appeal Commissioners and the Appeal Commissioners shall hear and determine the appeal made to them as if it were an appeal against an assessment to income tax, and the provisions of the Income Tax Acts relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications.

(e) The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions authorised by this subsection to be performed or discharged by the Revenue Commissioners, and references in this subsection to the Revenue Commissioners shall, with any necessary modifications, be construed as including references to an officer so nominated.

(6) (a) Where a company makes a distribution, including part of a distribution treated under subsection (2) as a distribution, in respect of any right or obligation to which section 139 relates and the distribution is made out of disregarded income, the company shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (3)(b) had not been enacted.

(b) Subsection (3) shall apply to a supplementary distribution under this subsection as if that supplementary distribution were a distribution made wholly out of disregarded income.

(7) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (2) as a distribution, made by a company out of disregarded income, section 152 shall apply to the company so that the statements provided for by that section shall show as respects each such distribution, in addition to the particulars required to be given apart from this section, that the distribution is made out of disregarded income.

(8) In relation to any supplementary distribution under subsection (6), section 152 shall apply to the company so that the statement required by subsection (1) of that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(9) Where a company makes a distribution for an accounting period, the distribution shall be regarded for the purposes of this section as having been made out of the distributable income (within the meaning of section 144 (8)) of that period to the extent of that income and, in relation to the excess of the distributions over that income, out of the most recently accumulated income.

(10) Subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for the purposes of that section.

Distributions out of profits of certain mines.

[CTA76 s81]

142. —(1) In this section—

exempted income” means income in respect of which a company has obtained relief under—

(a) the Finance (Profits of Certain Mines) (Temporary Relief from Taxation) Act, 1956, or

(b) Chapter II (Profits of Certain Mines) of Part XXV of the Income Tax Act, 1967;

other income” means income of a company which is not exempted income.

(2) Where a distribution for an accounting period is made by a company wholly out of exempted income, the distribution shall not be regarded as income for any purpose of the Income Tax Acts and, notwithstanding section 136 , the recipient of the distribution shall not be entitled to a tax credit in respect of it.

(3) Where a distribution for an accounting period is made by a company in part out of exempted income and in part out of other income, the distribution shall be treated as if it consisted of 2 distributions respectively made out of exempted income and other income, and subsection (2) shall apply to such part of the distribution as is made out of exempted income as it applies to a distribution made wholly out of exempted income.

(4) Any distribution, including part of a distribution treated under subsection (3) as a distribution, made out of exempted income shall, where the recipient is a company resident in the State, be deemed for the purposes of this section to be exempted income of the company.

(5) (a) Where a company makes a distribution, including part of a distribution treated under subsection (3) as a distribution, in respect of any right or obligation to which section 139 relates and the distribution is made out of exempted income, the company shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (2) had not been enacted.

(b) Subsection (2) shall apply to a supplementary distribution under this subsection as if the supplementary distribution were a distribution made out of exempted income, and section 152 (1) shall apply so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(6) Subsections (7) and (8) of section 144 and subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for the purposes of those sections.

(7) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (3) as a distribution, made out of exempted income, section 152 shall apply so that the statements provided for by that section shall show, in addition to the particulars required to be given apart from this section, that the distribution is made out of exempted income.

Distributions out of profits from coal, gypsum and anhydrite mining operations.

[CTA76 s82; FA77 s5(2) and Sch1 PtII; FA97 s37 and Sch2 par1]

143. —(1) In this section, “relieved income” means the income of a company—

(a) on which income tax was paid at a reduced rate by virtue of—

(i) section 395(1) of the Income Tax Act, 1967,

(ii) section 7 or 8 of the Finance (Miscellaneous Provisions) Act, 1956, or

(iii) section 32 of the Finance Act, 1960,

(b) on which income tax was borne by deduction at a reduced rate under—

(i) section 396(1) of the Income Tax Act, 1967, or

(ii) section 9 of the Finance (Miscellaneous Provisions) Act, 1956,

or

(c) which is franked investment income, the tax credit comprised in which has been reduced under this section.

(2) The tax credit in respect of a distribution made wholly out of relieved income shall, notwithstanding section 136 , be the amount determined by applying to the amount of the distribution the fraction—

A

_______

100 − A

where A is 50 per cent of the standard credit rate per cent for the year of assessment in which the distribution is made.

(3) Where a distribution is made in part out of relieved income and in part out of other income, the distribution shall be treated as if it consisted of 2 distributions respectively made out of relieved income and out of other income, and the tax credit in respect of each such distribution shall be calculated in accordance with subsection (2) and section 136 respectively.

(4) Any distribution, including part of a distribution treated under subsection (3) as a distribution, made out of relieved income shall, where the recipient is a company resident in the State, be deemed for the purposes of this section to be relieved income of the company.

(5) Subject to subsection (7), for the purposes of the Tax Acts, a distribution made by a company out of relieved income shall be treated as representing income equal to the aggregate of the amount or value of that distribution and the amount of the tax credit in respect of it calculated in accordance with this section.

(6) Where for a year of assessment the taxable income of an individual which is chargeable at the standard rate includes income represented by distributions made out of relieved income, the individual's liability to income tax in respect of the income represented by such distributions shall be an amount equal to the tax on that income calculated at 50 per cent of the standard rate for the year of assessment in which the distributions were made.

(7) Where for a year of assessment the taxable income of an individual which is chargeable at the higher rate includes income represented by distributions made out of relieved income, the individual's liability to income tax at the higher rate in respect of the income represented by such distributions shall be an amount equal to the tax, calculated at the higher rate for the year of assessment in which the distributions were made, on the income reduced by 50 per cent, and credit shall be given against that tax of an amount equal to tax at the standard credit rate for that year on the amount of the income as so reduced.

(8) Where a company makes a distribution, including part of a distribution treated as a distribution under subsection (3), in respect of any right or obligation to which section 139 relates and the tax credit in respect of that distribution is calculated in accordance with subsection (2), then, the company shall make a supplementary distribution of an amount equal to the excess of the tax credit which would have applied to the distribution if this section had not been enacted over the amount of the tax credit which in accordance with subsection (2) applies to the distribution, and the person to whom the distribution and the supplementary distribution are made shall be regarded as having received one distribution consisting of the aggregate of the distribution and the supplementary distribution.

(9) Notwithstanding section 136 , the recipient of a supplementary distribution under subsection (8) shall not be entitled to a tax credit in respect of such supplementary distribution, and section 152 (1) shall apply so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(10) Subsections (7) and (8) of section 144 and subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for the purposes of those sections.

(11) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (3) as a distribution, made by a company out of relieved income, section 152 shall apply so that the statements provided for by that section shall show, in addition to the particulars required to be given apart from this section, that the distribution is made out of relieved income and the amount of the tax credit which would apply in respect of the distribution if it were not made out of relieved income.

Distributions out of profits from trading within Shannon Airport.

[CTA76 s76(1), (2)(a)(ii) and (b) and (3) to (8); FA92 s35(b); FA97 s146(1) and (2), Sch9 PtI par10(1) and PtII]

144. —(1) In this section—

exempted trading operations” means trading operations which were exempted trading operations for the purposes for Part V of the Corporation Tax Act, 1976;

other profits” includes a dividend or other distribution of a body corporate resident in the State, but does not include a distribution to which subsection (3)(a) applies.

(2) Where a distribution for an accounting period is made by a body corporate in part out of income from exempted trading operations and in part out of other profits, the distribution shall be treated as if it consists of 2 distributions respectively made out of income from exempted trading operations and out of other profits.

(3) (a) So much of any distribution as has been made out of income from exempted trading operations shall, where the recipient of that distribution is a body corporate, be deemed for the purposes of this section to be income from exempted trading operations.

(b) The recipient of any distribution, including part of a distribution treated under subsection (2) as a distribution, made out of income from exempted trading operations shall not be entitled to a tax credit in respect of that distribution.

(4) (a) Where a body corporate makes a distribution, including part of a distribution treated under subsection (2) as a distribution, in respect of any right or obligation to which section 139 relates and the distribution is made out of income from exempted trading operations, the body corporate shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (3)(b) had not been enacted.

(b) Subsection (3) shall apply to a supplementary distribution under this subsection as if that supplementary distribution were a distribution made wholly out of income from exempted trading operations.

(5) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (2) as a distribution, made by a body corporate out of income from exempted trading operations, section 152 shall apply to the body corporate so that the statements provided for by that section shall show, as respects each such distribution, in addition to the particulars required to be given apart from this section, that the distribution is made out of income from exempted trading operations.

(6) In relation to any supplementary distribution under subsection (4), section 152 (1) shall apply to the body corporate so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(7) Where a body corporate makes a distribution for an accounting period, the distribution shall be regarded for the purposes of this section as having been made out of the distributable income of that period to the extent of that income and in relation to the excess of the distribution over that income out of the most recently accumulated income.

(8) For the purposes of subsection (7), the distributable income of a company for an accounting period shall be an amount determined by the formula—

(R − S) + T

where R, S and T have the same meanings respectively as in section 147 (1)(a).

(9) Subsections (6) and (7) of section 145 shall apply for the purposes of this section as they apply for purposes of that section.

Distributions out of profits from export of certain goods.

[CTA76 s28(8), s64 and s66A(1) and (2); FA78 s28(4); FA80 s42(6); FA82 s60(1); FA92 s35(a); FA97 s37 and Sch2 par1 and par3(3)]

145. —(1) This section shall apply to a distribution (in this section referred to as a “relevant distribution”) made or deemed to have been made by a company for an accounting period wholly or in part out of—

(a) the company's income for the accounting period the corporation tax in respect of which has been reduced under Part IV of the Corporation Tax Act, 1976, or

(b) a distribution or distributions received by the company in the accounting period in respect of which the tax credit is determined in accordance with this section.

(2) (a) Where a relevant distribution is made or is deemed for the purposes of this section to have been made by a company for an accounting period, the tax credit to which the recipient of the relevant distribution is entitled in respect of it shall be an amount arrived at by applying a fraction determined by the formula—

A + B

______

C

to the amount of the relevant distribution,

where—

A is an amount arrived at by applying to the amount of the company's distributable income for the accounting period, excluding distributions received by the company in that period, the fraction—

D

______

100 − D

where D is the standard credit rate per cent for the year of assessment in which the relevant distribution is made reduced in the same proportion as the company's liability to corporation tax on its income (other than its income from the sale of goods within the meaning of section 448 ) for the accounting period is reduced under section 58 of the Corporation Tax Act, 1976 , subject to paragraph (c) of the proviso to section 182(3), and paragraph (iii) of the proviso to section 184(3), of that Act,

B is the aggregate of the tax credits in respect of the amount referred to in subsection (4)(a)(ii), and

C is the amount of the company's distributable income for the accounting period.

(b) The reference to certain tax credits in the definition of “B” in paragraph (a) shall, in relation to distributions received by a company which makes a distribution to which this section applies, be construed—

(i) as a reference to such tax credits multiplied by .4937 in so far as they are tax credits in respect of distributions made before the 6th day of April, 1978, or made after the 5th day of April, 1983, and before the 6th day of April, 1988,

(ii) as a reference to such tax credits multiplied by .6203 in so far as they are tax credits in respect of distributions made after the 5th day of April, 1978, and before the 6th day of April, 1983,

(iii) as a reference to such tax credits multiplied by .5649 in so far as they are tax credits in respect of distributions made after the 5th day of April, 1988, and before the 6th day of April, 1989,

(iv) as a reference to such tax credits multiplied by .6835 in so far as they are tax credits in respect of distributions made after the 5th day of April, 1989, and before the 6th day of April, 1991,

(v) as a reference to such tax credits multiplied by .7975 in so far as they are tax credits in respect of distributions made after the 5th day of April, 1991, and before the 6th day of April, 1995, and

(vi) as a reference to such tax credits multiplied by .8899 in so far as they are tax credits in respect of distributions made after the 5th day of April, 1995, and before the 6th day of April, 1997.

(3) For the purposes of this section—

(a) where the total amount of the distributions made by a company for an accounting period exceeds the distributable income of the company for that accounting period, the excess shall be deemed for the purposes of this section to be a distribution for the immediately preceding accounting period;

(b) where the total amount of the distributions made or deemed under paragraph (a) to have been made by a company for the immediately preceding accounting period referred to in paragraph (a) exceeds the distributable income of the company for that accounting period, the excess shall be deemed to be a distribution for the next immediately preceding accounting period and so on;

(c) where the total amount of the distributions made or deemed under this subsection to have been made for the first accounting period for which the company came within the charge to corporation tax exceeds the distributable income of the company for that accounting period—

(i) the excess shall be deemed to be a distribution for the company's period of account which ended on the accounting date last before the 6th day of April, 1975, or, if there was no such period of account, to be a distribution for the year which ended on the 5th day of April, 1976, and

(ii) the tax credit in respect of the excess which is so deemed shall be an amount equal to the amount of income tax which under section 410 of the Income Tax Act, 1967 , the company would have been entitled to deduct from a dividend of such an amount as after deduction of that tax would equal the amount of the excess, and for this purpose it shall be assumed that the dividend was paid on the 5th day of April, 1976, and was in respect of such period of account or year which ended on the 5th day of April, 1976, as the case may be,

but the tax credit in respect of a distribution to which subparagraph (i) applies shall not exceed the amount which would be the amount of the tax credit in respect of the distribution if that tax credit were determined in accordance with section 136 (2).

(4) (a) For the purposes of this section, the distributable income of a company for an accounting period shall be the aggregate of the following amounts—

(i) the income of the company charged to corporation tax for the accounting period less the amount of corporation tax payable by the company for the accounting period which is attributable to that income, and

(ii) an amount equal to the distributions received by the company in the accounting period which is comprised in its franked investment income of the accounting period, other than franked investment income against which relief is given under section 83 (5), 157 or 158 , and which relief was not subsequently withdrawn under those sections.

(b) For the purposes of paragraph (a), the income of a company for an accounting period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne exclusive of the part of the profits attributable to chargeable gains, and that part shall be taken to be the amount brought into the company's profits for that period for the purposes of corporation tax in respect of chargeable gains before any deduction for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description.

(5) Where the distributable income of a company for an accounting period is to be determined for the purposes of this section in relation to a distribution made by the company for that accounting period (in this subsection referred to as “the first-mentioned distribution”), there shall be deducted from the aggregate mentioned in subsection (4)(a) the aggregate of the following amounts—

(a) the amount of the company's income which, in relation to the first-mentioned distribution, is to be taken into account in the definition of “A” in section 147 (1) (before any reduction under paragraph 5(2)(i) or 6(2)(i) of Schedule 32 ) as income of the company for the relevant accounting period (within the meaning of Part 14 ) which coincides with or is included in that accounting period, less the amount of corporation tax to be taken into account in the definition of “B” in section 147 (1) in respect of that amount of the company's income, and

(b) an amount equal to the distributions received by the company in the accounting period which are relevant distributions within the meaning of section 147 , and which are to be included within the definition of “E” in subsection (1) of that section in relation to the first-mentioned distribution.

(6) Where a period of account for or in respect of which a company makes a distribution is not an accounting period and part of the period of account falls within an accounting period, the proportion of the distribution to be treated for the purposes of this section as being for or in respect of the accounting period shall be the same proportion as that part of the period of account bears to the whole of that period.

(7) Where a company makes a distribution which is not expressed to be for or in respect of a specified period, the distribution shall be treated for the purposes of this section as having been made for the accounting period in which it is made.

(8) Where the income of a company for an accounting period includes a dividend from which income tax was deducted under section 456 of the Income Tax Act, 1967 , then, for the purposes of this section, the amount of tax so deducted shall be deemed to be a tax credit in respect of a distribution of an amount equal to the amount of the dividend reduced by the amount of tax so deducted.

(9) In relation to a relevant distribution (other than a supplementary distribution under section 146 ), section 152 shall apply so that the statements provided for by that section shall show, in addition to the particulars to be given apart from this section, the amount of the tax credit which would apply in respect of the distribution if it were not a relevant distribution.

(10) The inspector may by notice in writing require a company to furnish him or her with such information or particulars as may be necessary for the purposes of subsections (1) to (9), and, if the company does not comply with the requirements of the notice, it shall be liable to a penalty of £800.

(11) (a) In this subsection, “the relieved amount” means so much of a relevant distribution as is determined by the formula—

E −

F × (100 − G)

___________

G

where—

E is the amount of the distribution,

F is the amount of the tax credit in respect of the distribution, and

G is the standard credit rate per cent for the purposes of section 136 (2) in respect of the year of assessment in which the distribution is made.

(b) Notwithstanding any other provision of the Tax Acts, for the purposes of determining a person's liability, if any, to income tax in respect of distributions received by such person, so much of a relevant distribution as is the relieved amount shall be treated as a separate distribution received by the person in respect of which such person shall not be entitled to a tax credit, and the remainder, if any, of the relevant distribution shall be treated as a separate distribution received by such person in respect of which the tax credit shall be the tax credit in respect of the relevant distribution.

Provisions supplementary to section 145 .

[CTA76 s65]

146. —(1) Where a company makes a distribution in respect of any right or obligation to which section 139 relates and the tax credit in respect of that distribution is calculated in accordance with section 145 , the company shall make a supplementary distribution of an amount equal to the excess of the amount of the tax credit which would have applied to the distribution if section 145 had not been enacted over the amount of the tax credit which in accordance with section 145 applies to the distribution, and the person to whom the distribution and the supplementary distribution are made shall be regarded as having received one distribution consisting of the aggregate of the distribution and the supplementary distribution.

(2) Notwithstanding section 136 , the recipient of a supplementary distribution under subsection (1) shall not be entitled to a tax credit in respect of it.

(3) In relation to any supplementary distribution within the meaning of subsection (1), section 152 (1) shall apply to the company so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.