Income Tax (Trading and Other Income) Act 2005

[F1 401C Temporary non-residents U.K.

(1) This section applies if—

(a) an individual is temporarily non-resident,

(b) a relevant distribution is made or treated as made to the individual in the temporary period of non-residence,

(c) the tax year in which it is made or treated as made (“the distribution year”) is a tax year for which the individual is UK resident, and

(d) the amount of income tax charged on the distribution under this Chapter is less than it would have been if the existence of double taxation relief arrangements were disregarded.

(2) Subsections (3) and (4) have effect in cases where the distribution year is not the year of return.

(3) The total income (see Step 1 of the calculation in section 23 of ITA 2007) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount on which tax would be charged under this Chapter in respect of the distribution disregarding any double taxation relief arrangements.

(4) But the notional UK tax on that distribution is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23.

(5) If the distribution year is the year of return, the tax charged under this Chapter in respect of the relevant distribution is to be charged and assessed without regard to the existence of double taxation relief arrangements.

(6) For the purposes of this section, a dividend or other distribution is a “relevant distribution” if—

(a) it is a dividend or other distribution of a close company, and

(b) it is made or treated as made to the individual because the individual was at a relevant time—

(i) a material participator in the company, or

(ii) an associate of a material participator in the company.

[F2 (6A) Where—

(a) a company (“company A”) makes a payment (including by way of a loan) to the individual in the temporary period of non-residence,

(b) the individual is, at a relevant time, a material participator in, or is an associate of a material participator in, another company that is a close company (“company B”),

(c) at the time the payment is made, company B controls (within the meaning of sections 450 and 451 of CTA 2010) company A, and

(d) it is reasonable to suppose that the making of that payment is intended to avoid an amount being received by the individual by way of relevant distribution made, or treated as made, by company B,

company A is to be treated as making a relevant distribution of that amount to the individual in that period.

(6B) Where—

(a) a company makes a payment (including by way of a loan) to any person other than the individual at any time in the temporary period of non-residence,

(b) if the company had made a dividend to the individual at that time, it would have been a relevant distribution, and

(c) the individual receives an amount or a benefit (“the relevant receipt”) as a result of arrangements that it is reasonable to suppose are intended to secure that—

(i) the individual receives the benefit of the payment or any part of it, but

(ii) without a relevant distribution having been made, or treated as made, to the individual in that period,

the company is to be treated as making a relevant distribution to the individual in that period in the amount of the value of the relevant receipt.

(6C) For the purposes of subsection (6B)(c) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).]

[F3 (6D) Where tax of a similar character to income tax is payable by the individual under the law of a territory outside the United Kingdom on a relevant distribution—

(a) credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the relevant distribution, and

(b) the credit is to be given effect by treating the amount of the relevant distribution as reduced to such amount as would secure that so much of the credit is given as does not exceed the income tax chargeable in respect of the relevant distribution.]

F4 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) The “notional UK tax” on the relevant distribution is so much of the income tax paid by the individual for the distribution year as is attributable on a just and reasonable basis to the relevant distribution.

(11) If section 393 applies, references in this section to a distribution being made to the individual are to a cash dividend being paid over to the individual.

(12) In this section—

• “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454);

• “material participator” means a participator who has a material interest in the company, as defined in section 457 of that Act;

• “relevant time” means—

  (a)

  any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or

  (b)

  any time in one or more of the 3 tax years preceding that year;

• F5 ...]

Textual Amendments

F1 S. 401C and cross-heading inserted (with effect in accordance with Sch. 45 para. 153(3) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 133

F2 S. 401C(6A)-(6C) inserted (with effect in accordance with Sch. 3 para. 23(1) of the amending Act) by Finance Act 2026 (c. 11), Sch. 3 paras. 19(2), 23(1)

F3 S. 401C(6D) inserted (with effect in accordance with Sch. 3 para. 23(2) of the amending Act) by Finance Act 2026 (c. 11), Sch. 3 paras. 19(3), 23(2)

F4 S. 401C(7)-(9) omitted (with effect in accordance with Sch. 3 para. 23(2) of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 3 paras. 19(4), 23(2)

F5 Words in s. 401C(12) omitted (with effect in accordance with Sch. 3 para. 23(2) of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 3 paras. 19(5), 23(2)