Income and Corporation Taxes Act 1988

118G Relevant securities of eligible persons. U.K.

(1) Subject to subsection (2) below, and to the provisions of any regulations under section 118H—

(a) any relevant payment to which subsection (3) or (4) below applies shall not be a chargeable payment; and

(b) any relevant receipt to which subsection (4) below applies shall not be a chargeable receipt.

(2) Regulations made under paragraph (g), (h) or (i) of subsection (4) below may provide that only one of paragraphs (a) and (b) of subsection (1) above is to apply by virtue of those regulations in relation to relevant payments or relevant receipts of a particular kind or from a particular source.

(3) This subsection applies to payments of United Kingdom public revenue dividends so long as—

(a) they are exempt from tax by virtue of section 46, 49, 516 or 517;

(b) F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F2 (ca) they are payable in respect of a FOTRA security (within the meaning of section 154 of the Finance Act 1996) which—

(i) is not registered (within the meaning of section 50 of this Act); and

(ii) is, for the time being, beneficially owned by a person who is not ordinarily resident in the United Kingdom.]

(d) F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f) F1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) This subsection applies to relevant payments (not being payments of United Kingdom public revenue dividends) and relevant receipts—

(a) to which a person who, at the chargeable date—

(i) is not resident in the United Kingdom, and

(ii) beneficially owns the relevant holdings from which they are derived,

is beneficially entitled;

(b) which consist of, or of the proceeds of sale or other realisation of coupons for, interest (other than quoted Eurobond interest) to which a bank which, at the chargeable date—

(i) is resident in the United Kingdom, and

(ii) beneficially owns the foreign holdings from which they are derived,

is beneficially entitled;

(c) which arise to the trustees of a qualifying discretionary or accumulation trust in their capacity as such in respect of relevant holdings held on the trusts thereof;

(d) which are eligible for relief from tax by virtue of section 505(1)(c) or (d), or would be so eligible but for section 505(3);

(e) which are eligible for relief from tax by virtue of section 592(2), 608(2)(a), 613(4), 614(2), (3) or (4), 620(6) or 643(2);

(f) which consist of, or of the proceeds of sale or other realisation of coupons for, dividends payable out of the public revenue of the Republic of Ireland or out of or in respect of shares or securities issued by or on behalf of any Republic of Ireland company, society, adventure or concern;

(g) to which a person of such a description as may be prescribed and who, at the chargeable date, beneficially owns the securities from which they are derived, is beneficially entitled;

(h) which are derived from relevant holdings held by or on behalf of a person of such a description as may be prescribed;

(i) which are of such a description as may be prescribed; or

(j) which fall to be treated as the income of, or of the government of, a sovereign power or of an international organisation.

(5) For the purposes of subsection (4)(c) above, a trust is a qualifying discretionary or accumulation trust if—

(a) it is such that some or all of any income arising to the trustees would fall (unless treated as income of the settlor F3 . . . ) to be comprised for the year of assessment in which it arises in income to which section 686 (liability to additional rate tax of certain income of discretionary trusts) applies;

(b) the trustees are not resident in the United Kingdom; and

(c) none of the beneficiaries of the trust is resident in the United Kingdom.

(6) The persons who are to be taken for the purposes of subsection (5) above to be the beneficiaries of a discretionary or accumulation trust shall be every person who, as a person falling wholly or partly within any description of actual or potential beneficiaries, is either—

(a) a person who is, or will or may become, entitled under the trust to receive the whole or any part of any income under the trust; or

(b) a person to or for the benefit of whom the whole or any part of such income may be paid or applied in exercise of any discretion conferred by the trust;

and for the purposes of this subsection references, in relation to a trust, to income under the trust shall include references to so much (if any) of any property falling to be treated as capital under the trust as represents amounts originally received by the trustees as income.

(7) The Board may by regulations provide that a paying agent who is entrusted with the payment or distribution of[F4 foreign dividends on foreign holdings held by a nominee approved for the purposes of this subsection] shall treat those dividends as not being chargeable payments.

(8) F5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) Where, pursuant to subsection (7)F6 . . . above, dividends are paid without deduction of tax, F6 . . . the provisions of this Chapter shall apply, subject to F6 . . . the provisions of regulations under section 118H, as though the nominee was the paying agent in relation to those dividends and the chargeable date was the date on which he received them.

(10) F5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 S. 118G(3)(b)(d)-(f) repealed (with effect in accordance with s. 38(8), Sch. 8 Pt. 2(13) Note of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 38(5)(a), Sch. 8 Pt. 2(13)

F2 S. 118G(3)(ca) substituted for s. 118G(3)(c) (with effect in accordance with s. 38(8) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 38(5)(b)

F3 Words in s. 118G(5)(a) repealed (with effect in accordance with Sch. 7 para. 12(4) of the repealing act) by Finance Act 1997 (c. 16), Sch. 18 Pt. 6(7), Note 1

F4 Words in s. 118G(7) substituted (with effect in accordance with s. 38(8) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 38(6)

F5 S. 118G(8)(10) repealed (with effect in accordance with s. 38(8), Sch. 8 Pt. 2(13) Note of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 38(7), Sch. 8 Pt. 2(13)

F6 Words in s. 118G(9) repealed (with effect in accordance with Sch. 8 Pt. 2(13) Note of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 8 Pt. 2(13)

Modifications etc. (not altering text)

C1 S. 118G(1) excluded (30.7.1996) by The Income Tax (Paying and Collecting Agents) Regulations 1996 (S.I. 1996/1780), reg. 4(1)