Finance Act 1993

77 Application of lower rate

(1) In Chapter I of Part VI of the Taxes Act 1988 (taxation of company distributions), before section 208 there shall be inserted the following section—

“207A Application of lower rate to company distributions

(1) Subject to section 686, so much of any person’s total income in any year of assessment as—

(a) comprises income which is chargeable under Schedule F; and

(b) in the case of an individual, is not income falling within section 1(2)(b),

shall by virtue of this section be charged for that year at the lower rate, instead of at the rate otherwise applicable to it in accordance with section 1(2)(aa) and (a).

(2) So much of any person’s income as comprises income chargeable under Schedule F shall be treated for the purposes of subsection (1)(b) above and any other provisions of the Income Tax Acts as the highest part of his income.

(3) Subsection (2) above shall have effect subject to section 833(3) but shall otherwise have effect notwithstanding any provision requiring income of any description to be treated for the purposes of the Income Tax Acts (other than section 550) as the highest part of a person’s income.”

(2) The section 207A inserted in the Taxes Act 1988 by subsection (1) above shall apply, as it applies to income chargeable under Schedule F, to any income which—

(a) is chargeable to income tax under Case V of Schedule D;

(b) is such that, being a dividend or other distribution of a company not resident in the United Kingdom, it would be chargeable under Schedule F if the company were so resident; and

(c) is not such that tax is chargeable by virtue of section 65(5)(b) of that Act on the full amount of the actual sums received in the United Kingdom.

(3) In section 249 of that Act (issues of share capital treated as income)—

(a) in subsection (4)—

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

(ii) in paragraph (c), for “which is not chargeable at the lower rate and” there shall be substituted “to which (without prejudice to paragraph (a) above) section 207A shall be taken to apply as it applies to income chargeable under Schedule F, but shall be treated”;

and

(b) in subsection (6)(b), for “basic rate” there shall be substituted “lower rate”.

(4) In section 421(1) of that Act (taxation of borrower where loan under section 419 released)—

(a) in paragraph (a), after “tax” there shall be inserted “at the lower rate”;

(b) in paragraph (b), for “basic rate” there shall be substituted “lower rate”; and

(c) in paragraph (c), for the words from “which is not” to “that paragraph” there shall be substituted “to which (without prejudice to paragraph (b) above) section 207A shall be taken to apply as it applies to income chargeable under Schedule F, but, notwithstanding the preceding provisions of this subsection”.

(5) This section shall apply in relation to the year 1993-94 and subsequent years of assessment.