Section 401 | Relief: distribution repaying shares or security issued in earlier distribution

(1)Where a person is liable to income tax on a CD distribution, the person's liability to income tax on a subsequent non-CD distribution is reduced in accordance with this section if the non-CD distribution consists of a repayment of—^F1

(a)the share capital, or^F1

(b)the principal of the security,^F1

which constituted the CD distribution.

(1A)The reduction is—^F1

(a)the amount of income tax to which the person is liable on the CD distribution, or^F1

(b)if lower, the amount of income tax to which the person is liable on the non-CD distribution.^F1

(1B)For the purposes of calculating the amounts mentioned in subsection (1A)(a) and (b) assume—^F1

(a)that the CD distribution is the lowest part of the person's dividend income in the tax year (“year 1”) in which it is made,^F1

(b)that the non-CD distribution, if it is made in year 1, is the part of the person's dividend income in year 1 that is next lowest after the CD distribution, and^F1

(c)that the non-CD distribution, if it is made after year 1, is the lowest part of the person's dividend income in the tax year in which it is made.^F1

(6A)The reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.^F2

(7)In this section— “CD distribution” means a distribution which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) of CTA 2010 (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company),“non-CD distribution” means a distribution which is not a CD distribution, and“security” has the meaning given in section 1117(1) of CTA 2010.^F3F4