27(1)Section 468Q of the Taxes Act 1988 (dividend distribution to corporate unit holder) shall be amended as follows.
(2)In subsection (3) (as amended by paragraph 8(6)(b) of Schedule 6 to the [1997 c. 58.] Finance (No. 2) Act 1997)—
(a)for the definition of “C” there shall be substituted—
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such amount of the gross income as does not derive from franked investment income, as reduced by an amount equal to the trustees' net liability to corporation tax in respect of the gross income;”; and
(b)for the definition of “D” there shall be substituted—
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the amount of the gross income, as reduced by an amount equal to the trustees' net liability to corporation tax in respect of the gross income;”.
(3)After that subsection there shall be inserted—
“(3A)Any reference in this section to the trustees' net liability to corporation tax in respect of the gross income is a reference to the amount of the liability of the trustees of the authorised unit trust to corporation tax in respect of that gross income less the amount (if any) of any reduction of that liability which is given or falls to be given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1).”
(4)After subsection (5) there shall be inserted—
“(5A)Where, in relation to a dividend distribution, any tax is deemed to have been deducted by virtue of the application of subsection (2)(b) above, the amount to which the unit holder is entitled by way of repayment of that tax shall not exceed the amount of the unit holder’s portion of the trustees' net liability to corporation tax in respect of the gross income.
(5B)For the purposes of subsection (5A) above the unit holder’s portion shall be determined by reference to the proportions in which unit holders have rights in the authorised unit trust in the distribution period in question.
(5C)The trustees of the authorised unit trust shall in the appropriate statement sent to the unit holder under section 234A include a statement showing their net liability to corporation tax in respect of the gross income.”
(5)This paragraph has effect in relation to distribution periods beginning on or after 6th April 1999.