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Finance Act 1965

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5(1)Where paragraph 3 or 4 above has effect in determining for purposes of the principal section whether in the year 1965-66 a company pays a gross amount in dividends greater than the standard amount, and the company's profits in the financial year 1965 include dividends paid out of exempt trading income by overseas trade corporations which are members of the same group of companies, then the gross amount of dividends which the company is apart from this paragraph to be treated under the principal section as paying in the year 1966-67 shall be reduced by the amount on which income tax at the standard rate for the year 1966-67 is equal to the income tax payable by those overseas trade corporations on exempt trading income in respect of dividends paid thereout to the company in the year 1965-66, subject, however, to the limitation imposed by sub-paragraph (2) below on the amount of the exempt trading income to be taken into account under this paragraph.

(2)The exempt trading income to be taken into account under this paragraph shall not exceed the following fraction of the gross amount of dividends which the company is apart from this paragraph to be treated under the principal section as paying in the year 1966-67, that is to say.—

(a)where paragraph 3 has effect in relation to the company,

the fraction obtained by dividing by the amount of the company's profits in the financial year 1965 (as ascertained for purposes of the principal section) the gross amount of the dividends included therein which are paid by any such overseas trade corporations as aforesaid out of exempt trading income ; and

(b)where paragraph 4 above has effect in relation to the company, the fraction obtained by dividing by the amount taken under paragraph 4(2)(c) above as the profits of the company in the financial year 1965 the amount included therein of exempt trading income of such overseas trade corporations as aforesaid.

(3)Where sub-paragraph (2) above has effect in the case of the company to exclude part of the exempt trading income of other members of the same group, the part to be taken into account shall be such as that company may select.

(4)In relation to a dividend paid partly out of exempt trading income and partly not, this paragraph shall apply as if the two parts were separate dividends, and any question how far a dividend is paid out of exempt trading income, or out of what exempt trading income a dividend is paid, shall be determined for purposes of this paragraph as it is determined for purposes of Part IV of the Finance Act 1957.

(5)Where for purposes of the principal section the company's profits in the financial year 1965 are ascertained by reference to some period ending in that year, references in this paragraph to the financial year 1965 shall be construed as referring to that period ; but where the company's profits for another period are substituted for its profits in the financial year 1965, this paragraph shall not apply.

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