Income Tax Act 2007

276 Conditions relating to income

(1) Subsections (2) and (3) apply in determining for the purposes of the nature of income condition and the income retention condition—

(a) the amount of a company’s income, or

(b) the amount of income which a company derives from shares or securities.

(2) The amounts to be brought into account under Chapter 2 of Part 4 of FA 1996 in respect of the company’s loan relationships are to be determined without reference to any debtor relationship of the company.

(3) The excess of any relevant credits over any relevant debits is to be treated as income which the company derives from shares or securities.

In this subsection “relevant credits” and “relevant debits” are credits and debits brought into account by virtue of paragraph 14(3) of Schedule 26 to FA 2002 as if they were non-trading credits or non-trading debits.

(4) The income retention condition does not apply as regards an accounting period if the amount which the company would be required to distribute in order to meet that condition is less than—

(a) £10,000, or

(b) if the period is shorter than 12 months, a proportionately reduced amount.

(5) The income retention condition does not apply as regards an accounting period if—

(a) the company is required to retain income in respect of the period by virtue of a restriction imposed by law, and

(b) the amount of income which the company is so required to retain in respect of the period exceeds an amount equal to 15% of the income the company derives from shares or securities.

(6) Subsection (5) does not apply if—

(a) the amount of income the company retains in respect of the accounting period exceeds the amount of income it is required, by virtue of a restriction imposed by law, to retain in respect of the period, and

(b) the sum of the excess and any amount of income the company distributes in respect of the period is at least—

(i) £10,000, or

(ii) if the period is shorter than 12 months, a proportionately reduced amount.