http://www.legislation.gov.uk/ukpga/2005/5/section/400/notesIncome taxTaxLegal servicesLegislationIncomeExplanatory Notes to Income Tax (Trading and Other Income) Act 2005Inland RevenueKing's Printer of Acts of Parliament2020-04-20 5 24 March 2005 Chapter 3: Dividends etc. from UK resident companies etc. 1618 This section is based on section 233(1) of ICTA and applies when a person receives a non-qualifying distribution. 1619 A non-qualifying distribution is defined as any distribution which is not a qualifying distribution (see subsection (6)). A qualifying distribution is defined in section 14(2) of ICTA. Broadly, a non-qualifying distribution is an issue of redeemable share capital (unless the share capital is taxed as a stock dividend) or of securities in respect of shares or securities of the issuing company otherwise than wholly for new consideration. A non-qualifying distribution does not carry a tax credit. 1620 Subsection (2) treats the recipient of the non-qualifying distribution as having paid income tax at the dividend ordinary rate (Schedule F ordinary rate in the source legislation) on the actual amount of the non-qualifying distribution (that is, there is no grossing up). 1621 The words “not being a company resident in the United Kingdom” in section 233(1) of ICTA create similar difficulties to those in sections 231(3) and 233(1A) of ICTA. See Change 84 in Annex 1. 1622 Subsections (4) and (5) are based on section 233(1B) of ICTA. In the case of trustees of accumulation or discretionary trusts, the trustees are taxed on the amount or value of the distribution at the dividend trust rate (Schedule F trust rate in the source legislation). However, the trustees’ tax liability is reduced by an amount of income tax equivalent to the dividend ordinary rate (Schedule F ordinary rate in the source legislation).