Finance Act, 1989

Amendment of section 45 (distributions) of Finance Act, 1980.

24.—As respects distributions made by a company on or after the 6th day of April, 1989, section 45 (as amended by the Finance Act, 1988 ) of the Finance Act, 1980 , is hereby amended:

(a) in paragraph (a) of subsection (1)—

(i) by the insertion after “subsection (1A)” of “or section 25 of the Finance Act, 1989,”,

(ii) by the substitution for “is equal to” of “does not exceed”,

(iii) by the substitution for the formula therein of the following formula:

“Y ×

(A − B) + E − U

_____________

(R − S) + T − W

”,

and

(iv) by the substitution for the definition of “U” of the following:

“U is the amount of relevant distributions made by the company before the 6th day of April, 1989, which—

(i) were made for the accounting period, or

(ii) would be deemed to have been made for the accounting period by virtue of subsections (3) and (6) of section 64 of the Corporation Tax Act, 1976 , if—

(I) the said subsections (3) and (6) were treated as applying for the purposes of this definition as they apply for the purposes of the said section 64, and

(II) ‘relevant distribution’ and ‘distributable manufacturing income’ were substituted for ‘distribution’ and ‘distributable income’, respectively, wherever those terms occur in the said subsections (3) and (6),

W is the amount of the distributions made by the company before the 6th day of April, 1989 which—

(i) were made for the accounting period, or

(ii) would be deemed to have been made for the accounting period by virtue of subsections (3) and (6) of section 64 of the Corporation Tax Act, 1976 , if—

(I) the said subsections (3) and (6) were treated as applying for the purposes of this definition as they apply for the purposes of the said section 64, and

(II) every reference to ‘distributable income of the company’ in the said subsection (3) were a reference to the amount determined by the formula

(R − S) + T

where R, S and T have the same meanings as otherwise in this paragraph,

and”,

(b) in subsection (1A), by the substitution for the first proviso of the following:

“Provided that where a distribution made by a company is—

(a) an interim dividend paid before the 6th day of April, 1990, by the directors of the company, pursuant to powers conferred upon them by the articles of association of the company, in respect of the profits of the accounting period in which it is paid, or

(b) a distribution by virtue only of subparagraph (ii), (iii) (I) or (v) of section 84 (2) (d) of the Corporation Tax Act, 1976 , or

(c) a distribution made in respect of shares of a type referred to in paragraph (c) of the definition of ‘preference shares’ in subsection (1) of section 42 (as amended by this Act) of the Finance Act, 1984 ,

it shall be treated, subject to the following proviso, as having been made for the accounting period in which the said first-mentioned day falls:”,

(c) in paragraph (a) of subsection (1B), by the substitution of “W” for “U” in each place where it occurs, and

(d) in subsection (2) by the deletion of “, by virtue of subsections (1) and (1A),” and the insertion after “treated” where it first occurs of “for the purposes of this subsection”,

and the said paragraph (a) of subsection (1), subsection (1B) (other 25 than paragraph (b)) and subsection (2), as so amended, are set out in the Table to this section.

TABLE

(1) (a) There shall be treated as a specified distribution for the purposes of subsection (2) so much of a distribution (hereafter in this paragraph referred to as “the first-mentioned distribution”) treated under subsection (1A) or section 25 of the Finance Act, 1989, as made by a company for an accounting period as does not exceed the amount, which may be nil, determined by the formula

Y ×

(A − B) + E − U

_____________

(R − S) + T − W

where, subject to sections 46 to 49—

A is the amount of the company's income, the corporation tax referable to which is reduced under section 41, for the relevant accounting period which coincides with or is included in the accounting period,

B is the amount of the corporation tax, as reduced under section 41, referable to the amount mentioned in the definition of A,

E is the amount of the relevant distributions, whether made before the 6th day of April, 1989, or on or after that day, received by the company in the accounting period, which is included in its franked investment income of the accounting period, other than franked investment income against which relief is given under section 15 (4), 25 or 26 of the Corporation Tax Act, 1976 , and which relief was not subsequently withdrawn under the provisions of those sections,

R is the amount of the income of the company charged to corporation tax for the accounting period as defined in section 28 (8) of the Corporation Tax Act, 1976 , with the addition of any amount of income of the company which would be charged to corporation tax for the accounting period but for the provisions of section 18 of the Finance Act, 1969 , section 34 of the Finance Act, 1973 , or section 71 of the Corporation Tax Act, 1976 ,

S is the amount of the corporation tax which, before any set-off of, or credit for, tax, including foreign tax, and after any relief under section 58 , 182 or 184 of the Corporation Tax Act, 1976 , or section 41 of the Finance Act, 1980 , is chargeable for the accounting period, exclusive of the corporation tax, before any credit for foreign tax, chargeable on the part of the company's profits attributable to chargeable gains for that period: and that part shall be taken to be the amount brought into the company's profits for that period for the purposes of corporation tax in respect of chargeable gains before any deduction for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description,

T is the amount of the distributions received by the company in the accounting period which is included in its franked investment income of the accounting period, other than franked investment income against which relief is given under section 15 (4), 25 or 26 of the Corporation Tax Act, 1976 , and which relief was not subsequently withdrawn under the provisions of those sections, with the addition of any amount received by the company in the accounting period to which the provisions of section 76 (2) (a) (ii), section 81 (4), section 93 (3) or section 170 (3) of the Corporation Tax Act, 1976 , applies,

U is the amount of relevant distributions made by the company before the 6th day of April, 1989, which—

(i) were made for the accounting period, or

(ii) would be deemed to have been made for the accounting period by virtue of subsections (3) and (6) of section 64 of the Corporation Tax Act, 1976 , if—

(I) those subsections were treated as applying for the purposes of this definition as they apply for the purposes of the said section 64, and

(II) “relevant distribution” and “distributable manufacturing income” were substituted for “distribution” and “distributable income”, respectively, wherever those terms occur in the said subsections (3) and (6),

W is the amount of the distributions made by the company before the 6th day of April, 1989, which—

(i) were made for the accounting period, or

(ii) would be deemed to have been made for the accounting period by virtue of subsections (3) and (6) of section 64 of the Corporation Tax Act, 1976 , if—

(I) the said subsections (3) and (6) were treated as applying for the purposes of this definition as they apply for the purposes of the said section 64, and

(II) every reference to “distributable income of the company” in the said subsection (3) were a reference to the amount determined by the formula

(R − S) + T

where R, S and T have the same meanings as otherwise in this paragraph,

and

Y is the amount of the first-mentioned distribution.

(1B) For the purposes of this section—

(a) the amount of the distributable income of a company for an accounting period shall be the amount determined by the formula

(R − S) + T − W

where R, S, T and W have the same meanings as in subsection (1), and

(2) Where a distribution made by a company on or after the 6th day of April, 1989 (hereafter in this subsection referred to as the first-mentioned distribution) is treated for the purposes of this subsection, as the case may be, as—

(i) consisting of, or including, a specified distribution, or

(ii) consisting of two or more distributions, one or more of which is treated as consisting of, or including, a specified distribution,

the first-mentioned distribution shall, notwithstanding any other provision of the Corporation Tax Acts, be treated for the purposes of those Acts as if it consisted of two distributions, either, but not both, of which may be nil, being respectively—

(a) a distribution which shall be a relevant distribution for the purposes of this section of an amount equal to the amount of the specified distribution mentioned in paragraph (i) or equal to the total amount of the specified distributions mentioned in paragraph (ii), as the case may be, and

(b) a distribution which is not a relevant distribution and which consists of the balance of the first-mentioned distribution.