Commentary

D8.119 Participants chargeable to corporation tax

Corporate tax
Corporate tax | Commentary

D8.119 Participants chargeable to corporation tax

Corporate tax | Commentary

D8.119 Participants chargeable to corporation tax

General rules

In general the deduction obligation (see D8.118) does not apply if an interest distribution is made to a participant chargeable to corporation tax. However, if the participant is a company which is the trustee of the trust to which, or under which the interest distribution is made or received, the deduction obligation is not excluded and therefore applies. In its application to an interest distribution to a participant in respect of accumulation units, the deduction obligation is an obligation to deduct a sum out of the amount being invested on the participant's behalf1.

If a dividend distribution for a distribution period is made to a participant by the legal owner2 of an authorised investment fund and on the distribution date for that distribution period the participant is within the charge to corporation tax, the unfranked part of the dividend distribution is treated as an annual payment received net of basic rate income tax3.

These rules do not apply (ie there is no deemed tax deduction) if:

  1.  

    (a)     the dividend distributions are within the charge to corporation tax on trade profits4 (unless they are dividend distributions which are received in respect of non-BLAGAB long-term business5)

  2.  

    (b)     on the distribution date, the participant is the manager of the authorised investment fund; these rules do not apply in so far as the right in respect of which the dividend distribution is made are held by the participant in the ordinary course of his business as the manager

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