Finance Act 1993

2 (1) In subsection (1) of section 233 of that Act (taxation of certain recipients and in respect of non-qualifying distributions)— E+W+S+N.I.

(a) for the words “basic rate”, in each place where they occur, there shall be substituted “ lower rate ”; and

(b) in paragraph (c), the words “as income which is not chargeable at the lower rate and” shall be omitted.

(2) After that subsection there shall be inserted the following subsections—

“(1A) Where in any year of assessment the income of any person who is not a company includes a qualifying distribution in respect of which that person, not being resident in the United Kingdom, is not entitled to a tax credit—

(a) the amount or value of the distribution so far as it is comprised in—

(i) income to which an assessment such as is mentioned in paragraph (b) of subsection (1) above relates, or

(ii) income chargeable to tax in accordance with section 686 at the rate applicable to trusts,

shall be deemed for the purposes of that assessment or, as the case may be, that section to be the sum which if reduced by an amount equal to income tax on that sum at the lower rate would be equal to the amount or value of the distribution actually made; and

(b) that person shall be treated for the purposes of section 686 as having paid tax at the lower rate on any amount which under paragraph (a) above is deemed to be the amount or value of the distribution for the purpose of that section;

but no repayment shall be made of any income tax treated by virtue of this subsection as having been paid.

(1B) Where in any year of assessment the income of any trustees which is chargeable to income tax in accordance with section 686 includes any non-qualifying distribution (within the meaning of subsection (2) below), the trustees’ liability under any assessment made in respect of income tax at the rate applicable to trusts on the amount or value of the distribution, or on any part of the distribution, shall be reduced by a sum equal to income tax at the lower rate on so much of the distribution as is assessed at the rate applicable to trusts.”

(3) In subsection (2) of that section, in the definition of “excess liability”—

(a) for the words from “not chargeable” to “basic rate” there shall be substituted “ were charged at the lower rate ”; and

(b) for “any higher rate” there shall be substituted “ the higher rate or, as the case may be, the rate applicable to trusts ”.