Finance Act 1951

Section 28.

SIXTH SCHEDULE Transitional Provisions in connection with increase in rate of Profits Tax

Miscellaneous Transitional Provisions

1 (1) In the case of any trade or business, the amount on which a distribution charge is chargeable at forty per cent. for any chargeable accounting period shall not, when added to the total of the amounts (if any) on which distribution charges at forty per cent. have fallen to be made for previous chargeable accounting periods, exceed the total of the amounts on which reliefs for non-distribution have been given at forty per cent. for previous chargeable accounting periods ; and in so far as this sub-paragraph excludes the application to a distribution charge of paragraph (b) of subsection (1) of section twenty-eight of this Act, the rate of the charge shall be twenty per cent.:

Provided that the amount on which a distribution charge is chargeable at twenty per cent. for any chargeable accounting period shall not, when added to the total of the amounts (if any) on which distribution charges at twenty per cent. have fallen to be made for previous chargeable accounting periods, exceed the total of the amounts on which reliefs for non-distribution have been given at twenty per cent. for previous chargeable accounting periods ; and in so far as this proviso excludes the application of the rate of twenty per cent. to a distribution charge, the rate of the charge shall be fifteen per cent.

(2) Where, in the case of any body corporate, society or other body, the net relevant distributions to proprietors for any chargeable accounting period ending after the end of the year nineteen hundred and fifty are, under subsection (3) of section thirty-six of the Finance Act, 1947, as amended by section seventy of the Finance Act, 1948, to be treated as reduced by reference to a loan repaid whether before, during or after that period, the reduction shall be determined by reference to tax at forty per cent. instead of twenty per cent. or fifteen per cent.:

Provided that if a distribution charge is or would but for that subsection be chargeable for that period, then the reduction shall be calculated—

(a) by reference to tax at twenty per cent. up to the amount (if any) on which the distribution charge would, but for the reduction, be chargeable at twenty per cent.; and

(b) by reference to tax at fifteen per cent. up to the amount (if any) on which the distribution charge would, but for the reduction, be chargeable at fifteen per cent.

(3) Where under either of the following provisions of the Finance Act, 1947, that is to say—

(a) subsection (4) of section thirty-six (which relates to schemes of amalgamation or reconstruction); and

(b) subsection (2) of section thirty-eight (which relates to companies having subsidiaries),

a difference in respect of which a non-distribution relief was given to or in respect of any body corporate is to be treated (in whole or in part) as if it had been a difference arising in relation to another body corporate on which non-distribution relief had been given to that body, then, for the purposes of sub-paragraph (1) of this paragraph, relief shall be treated as having been given to the second mentioned body on the difference or the relevant part thereof at the rate or rates at which it was given on the difference to or in respect of the first mentioned body.

(4) The provisions set out in the third column of the Schedule to the Profits Tax Act, 1949, which modified the application of certain enactments in relation to accounting periods divided by subsection (1) of section one of that Act, shall have effect so as to modify the application of those enactments also in relation to accounting periods divided by subsection (1) of section twenty-eight of this Act:

Provided that, as respects double taxation relief—

(a) the reference in the said Schedule to paragraph 3 of Part I of the Ninth Schedule to the Finance Act, 1947, shall be deemed to include a reference to paragraph 1 of Part II of the Sixth Schedule to the Finance Act, 1950; and

(b) any foreign tax which, but for this paragraph of this proviso, would, under paragraph 7 of the said Part I, as amended by paragraph 2 of the said Part II, have gone to reduce the profits of the trade or business for the first of the two . chargeable accounting periods shall instead be apportioned between the two chargeable accounting periods by reference to the number of months or fractions of a month in each of them respectively and the profits of each reduced accordingly.

Increases of Dividend

2 (1) If, in the case of any accounting period of a body corporate, unincorporated society or other body beginning before the end of the year nineteen hundred and fifty, the total of the dividends assignable to that period exceeds the governing total, any such dividends declared after the ninth day of April, nineteen hundred and fifty-one, shall, to the extent of the excess—

(a) in determining the gross relevant distributions to proprietors for the chargeable accounting period beginning at the end of the year nineteen hundred and fifty or for that in which they are paid, whichever is later, be included as a distribution for that chargeable accounting period ; and

(b) in determining those for any chargeable accounting period other than the one last mentioned, be left out of account.

(2) The governing total for the purposes of sub-paragraph (1) of this paragraph is, in relation to any accounting period of a body corporate, society or other body, the total of the dividends assignable to the immediately preceding accounting period thereof :

Provided that—

(a) where the amount of any class of paid up share capital on which dividends assignable to the preceding accounting period are paid is less than the amount of that class of paid up share capital on which dividends assignable to the succeeding accounting period are paid, then (subject to sub-paragraph (3) of this paragraph) the dividends on that class of capital assignable to the said preceding period shall, if the person carrying on the trade or business so elects, be treated for the purposes of this sub-paragraph as correspondingly increased.; and

(b) where the preceding accounting period is longer or shorter than the succeeding accounting period, the total dividends assignable to the said preceding period shall be treated for the purposes of this sub-paragraph as correspondingly reduced or increased.

(3) For the purposes of paragraph (a) of the proviso to sub-paragraph (2) of this paragraph, any increase in the amount of any class of paid up share capital on which dividends are paid shall be disregarded in so far as it represents shares which were previously unissued or not paid up but which have since been issued, or been treated as paid up, wholly or partly in consideration of the retention by the body or society, by way of set-off or otherwise, of sums distributable by way of dividend.

(4) For the purposes of this paragraph, the dividends assignable to any accounting period are those expressed to be paid in respect of that period or any part thereof, but in the case of an accounting period ending after the ninth day of April, nineteen hundred and fifty-one, include also any dividends which are declared after that date and paid during the period and are not expressed to be paid in respect of any period.

(5) In this paragraph, " dividend " includes an interim dividend, and a dividend shall be treated as being declared—

(a) in the case of a dividend declared by a body or society in general meeting, at the date of the declaration ;

(b) in any other case, at the date on which it is paid:

Provided that—

(i) where a dividend is declared in general meeting in accordance with a recommendation of the directors and the directors' decision to make that recommendation was, with the authority of the directors, publicly announced at an earlier date, the dividend shall, for the purposes of this paragraph, be treated as declared at that earlier date; and

(ii) where a dividend not so declared is paid in accordance with a decision of the directors and that decision was, with their authority, publicly announced at an earlier date, the dividend shall, if the body or society so elects, for the purposes of this paragraph be treated as declared at that earlier date.