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Treatment of dividends on certain preference shares.
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42.—(1) In this section—
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“preference shares” does not include preference shares—
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(a) which are quoted on a stock exchange in the State, or
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(b) which are not so quoted but which carry rights in respect of dividends and capital which are comparable with those general for fixed-dividend shares quoted on a stock exchange in the State;
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“shares” includes stock.
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(2) Subject to subsection (4), this section applies to any dividend which—
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(a) is paid on or after the 25th day of January, 1984, by a company (hereafter in this section referred to as “the issuer”) to another company (hereafter in this section referred to as “the subscriber”) which is within the charge to corporation tax, and
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(b) is so paid in respect of preference shares of the issuer.
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(3) Notwithstanding any provision of the Tax Acts—
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(a) the subscriber shall not be entitled to a tax credit in respect of a dividend to which this section applies, and
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(b) the dividend shall be chargeable to corporation tax under Case IV of Schedule D.
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(4) This section shall not apply to any dividend which is payable on or before the relevant day in respect of preference shares—
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(a) issued to the subscriber before the 25th day of January, 1984, or
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(b) issued to the subscriber on or after that date in a case where the subscriber had either—
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(i) entered into an obligation before the 25th day of January, 1984, to subscribe for those shares, or
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(ii) entered into an obligation before the 1st day of March, 1984, in pursuance of negotiations which were in progress between the issuer and the subscriber before the 25th day of January, 1984, to subscribe for those shares:
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Provided that—
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(I) an obligation shall be treated for the purposes of paragraph (b) as having been entered into before a particular date if, but only if, before that date, there was in existence a binding contract in writing under which that obligation arose, and
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(II) negotiations pursuant to which an obligation was entered into shall not be regarded for the purposes of paragraph (b) (ii) as having been in progress before the 25th day of January, 1984, unless, on or before that date, preliminary commitments or agreements in relation to that obligation had been entered into between the issuer and the subscriber.
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(5) In subsection (4) “the relevant day” means the 24th day of January, 1989, or, as respects shares to which paragraph (b) (ii) of that subsection applies, the 28th day of February, 1989.
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