Finance (No. 2) Act 1945

52 Deduction of income tax from dividends.

(1) This section applies to any dividend payable more than two months after the passing of this Act, being a dividend from which deduction of tax is authorised by Rule 20 of the General Rules, and in this section the expression " the company " means a body of persons paying a dividend to which this section applies.

(2) Subsection (5) of section twenty-seven of the Finance Act, 192o (which limits the rate at which tax may be deducted from dividends) shall not apply to any dividend to which this section applies, and the amount of tax which is authorised by Rule 20 of the General Rules to be deducted from any such dividend shall be determined without taking into account any reduction, by reason of double taxation relief, of the United Kingdom income tax payable directly or by deduction by the company, but—

(a) notwithstanding anything in the Income Tax Acts, no relief or repayment in respect of the tax deducted or authorised to be deducted from any such dividend shall be allowed at a rate exceeding the rate (hereinafter referred to as " the net United Kingdom rate ") of the United Kingdom income tax payable directly or by deduction by the company after taking double taxation relief into account; and

(b) where the United Kingdom income tax payable directly or by deduction by the company is affected by double taxation relief, the particulars to be given by the company in the statement required by section thirty-three of the [14 & 15 Geo. 5. c. 21.] Finance Act, 1924, shall (in addition to the particulars required to be given apart from this section) include particulars of the net United Kingdom rate.

(3) Where a dividend to which this section doe's not apply has 'been paid, whether before or after the passing of this Act, and any double taxation relief would have fallen to be taken into account in relation to that dividend if this section had applied thereto, that relief shall, unless it is relief which has been taken into account for the purposes of subsection (5) of the said section twenty-seven, be taken into account as far as possible in determining the net United Kingdom rate in relation to the first dividend payable by the company to which this section applies, and any part of that relief which cannot be so taken into account shall as far as possible be taken into account in relation to the next succeeding dividend, and so on.

(4) Where the whole or any part of any annual payment is payable out of a dividend to which this section applies, and the rate of relief or repayment allowable in respect of the tax deducted or authorised to be deducted from the dividend is affected by double taxation relief, the annual payment, or that part thereof, as the case may be, shall be deemed to be paid out of profits or gains not brought into charge to tax and Rule 21 of the General Rules shall apply accordingly, but the tax chargeable under the said Rule on the person making the payment shall be reduced by an amount equal to tax on the payment or part of the payment at the net United Kingdom rate applicable to the dividend.

(5) In this section the expression " double taxation relief " means any credit for foreign income tax which is allowable against United Kingdom income tax by virtue of arrangements having effect under this Part of this Act and any relief allowable under the provisions of section twenty-seven of the Finance Act, 1920, including any credit or relief which has been taken into account for the purposes of determining the net United Kingdom rate applicable to any dividends received by the company.