Finance Act, 1980

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Distributions.

45.—(1) For the purposes of this section a distribution made by a company shall be a relevant distribution if it is made on a day (hereafter in this section referred to as “the relevant day”) falling on or after the 1st day of January, 1981, and if the total amount of the distributions made by the company on that day does not exceed an amount (hereafter in this section referred to as “the amount of the primary fund”) determined by the formula

(A−B) + (C−D) + E−F

where, subject to sections 46 to 49—

A is the amount of the company's income the corporation tax in respect of which is reduced under section 41 for the last relevant accounting period of the company which ended before the relevant day:

Provided that where the distribution is not a distribution declared by the company in a general meeting held as an annual general meeting this definition shall have effect as if the reference therein to the last relevant accounting period which ended before the relevant day were a reference to the relevant accounting period of the company in which the distribution is made,

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

C is the aggregate of the amounts of the company's income the corporation tax in respect of which is reduced under section 41 for all relevant accounting periods of the company preceding the relevant accounting period which falls to be taken into account in the definition of A,

D is the aggregate of the amounts of the corporation tax, as reduced under section 41, in respect of the amounts of income comprised in the aggregate amount calculated in accordance with the definition of C,

E is the aggregate amount of the relevant distributions received by the company at any time prior to the relevant day:

Provided that a relevant distribution shall not be included within this definition if the distribution, together with the tax credit to which the company is entitled in respect of it, is 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relief is given under section 15 (4), 25 or 26 of the Corporation Tax Act, 1976 , and which relief was not subsequently withdrawn under the provisions of those sections, and

F is the aggregate amount of the relevant distributions made by the company on any day earlier than the relevant day.

(2) Where in relation to a company the amount of the primary fund is greater than zero but is less than the total amount of the distributions made by the company on the relevant day, a distribution made by the company on that day shall be treated as if it consisted of two distributions being, respectively—

(a) a relevant distribution equal to such an amount as bears to the whole of the distribution the same proportion as the amount of the primary fund bears to the total amount of the distributions so made on that day, and

(b) a separate distribution which is not a relevant distribution and which consists of the balance of the distribution.

(3) The tax credit to which a recipient of a relevant distribution is entitled in respect of it shall, notwithstanding section 88 (2) of the Corporation Tax Act, 1976 , be an amount equal to one-eighteenth of the amount of the relevant distribution.

(4) In relation to a relevant distribution, section 83 (4) (a) of the Corporation Tax, Act, 1976, shall have effect as if for “income tax at the standard rate for that year on” there were substituted “one-nineteenth of”.

(5) The tax credit (if any) to which the recipient of a distribution to which subsection (2) (b) applies is entitled in respect of the distribution shall be calculated in accordance with the provisions of the Corporation Tax Acts other than subsection (3).

(6) In relation to a relevant distribution (including part of a distribution which is treated under subsection (2) as a relevant distribution) made by a company, sections 5 and 83 (5) of the Corporation Tax Act, 1976 , shall apply to the company so that the statements provided for by those sections shall show, as respects each such distribution, in addition to the particulars required to be given apart from this subsection, that the distribution is a relevant distribution within the meaning of this section.

(7) Where, on a claim being made by a company for relief under this Chapter in relation to a trade for any relevant accounting period, it appears to the inspector, or, on appeal, to the Appeal Commissioners, that, when account is taken of that relief, the amount of the primary fund in relation to any distribution (including part of a distribution to which subsection (2) (b) applies) made by the company on a relevant day is such that the amount of the tax credit to which the recipient of the distribution was shown to be entitled on the statement annexed to or accompanying any warrant or cheque or other order mentioned in section 5 of the Corporation Tax Act, 1976 , or in any statement mentioned in section 83 (5) of that Act, is greater than the amount of the tax credit to which the said recipient is entitled under the provisions of this section, then any relief under this Chapter to which the company would otherwise be entitled in respect of the trade for the relevant accounting period shall be reduced by the excess of the amount of the tax credit to which the recipient was so shown to be entitled over the amount to which he is entitled under the provisions of this section, and there shall be made such additional assessments or adjustments of assessments as may in any case be required in order to give effect to this subsection:

Provided that—

(a) no account shall be taken of the reduction of relief under this Chapter by virtue of this subsection in determining any amount which falls to be taken into account—

(i) in the definition of B or D in subsection (1),

(ii) in paragraph (bb) of the proviso to subsection (3) of section 182 of the Corporation Tax Act, 1976 , or

(iii) in paragraph (iiA) of the proviso to subsection (3) (b) of section 184 of that Act, and

(b) the provisions of this subsection shall not apply if the inspector, or, on appeal, the Appeal Commissioners, is or are satisfied that, either by reason of a correction by the company of the statement annexed to or accompanying the relevant warrant or cheque or other order mentioned in section 5 of the Corporation Tax Act, 1976 , or of the statement mentioned in section 83 (5) of that Act, or for any other good and sufficient reason, it would be just and reasonable that they should not apply.

(8) The inspector may by notice in writing require a company to furnish him with such information or particulars as may be necessary for the purposes of this section and if the company does not comply with the requirements of the notice it shall be liable to a penalty of £100.