Part 4Savings and investment income
Chapter 5Stock dividends from UK resident companies
F1413ATemporary non-residents
(1)
This section applies if—
(a)
an individual is temporarily non-resident,
(b)
relevant stock dividend income is treated under this Chapter as arising to the individual in the temporary period of non-residence,
(c)
the tax year in which it is treated as arising (“the arising year”) is a tax year for which the individual is UK resident, and
(d)
the amount of income tax charged on the relevant stock dividend income 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 arising 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 relevant stock dividend income disregarding any double taxation relief arrangements.
(4)
But the notional UK tax on that relevant stock dividend income 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 arising year is the year of return, the tax charged under this Chapter in respect of the relevant stock dividend income is to be charged and assessed without regard to the existence of double taxation relief arrangements.
(6)
Stock dividend income is “relevant stock dividend income” if—
(a)
the UK resident company that issues the share capital or bonus share capital is a close company, and
(b)
the individual is beneficially entitled to that share capital or bonus share capital by virtue of being 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 was 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 of relevant stock dividend income being treated under this Chapter as arising to the individual in that period,
relevant stock dividend income in that amount is treated as arising 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 issued share capital in lieu of a cash dividend shares at that time that the individual is beneficially entitled to, relevant stock dividend income would have been treated under this Chapter as arising to the individual in that period, 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 relevant stock dividend income in that amount being treated under this Chapter as arising to the individual in that period,
relevant stock dividend income in amount of the value of the relevant receipt is treated as arising to the individual in that period.
(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 relevant stock dividend income—
(a)
credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the relevant stock dividend income, and
(b)
the credit is to be given effect by treating the amount of the relevant stock dividend income 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 stock dividend income.
F4(7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4(8)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4(9)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10)
The “notional UK tax” on the relevant stock dividend income is so much of the income tax paid by the individual for the arising year as is attributable on a just and reasonable basis to that income.
(11)
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...