Income Tax (Trading and Other Income) Act 2005 section 397AA

Tax credit under section 397A: conditions

Section 397AA sets out the three alternative conditions that must be satisfied before an individual can claim a tax credit on a distribution from a non-UK resident company under section 397A.

• A tax credit on a distribution from a non-UK resident company is only available if one of three conditions (A, B or C) is met.
• Condition A applies where the distributing company has issued share capital and the recipient is a minority shareholder (as defined in section 397C).
• Condition B applies where the distributing company is an offshore fund substantially invested in interest-bearing assets, so that distributions are treated as interest.
• Condition C applies where the distributing company is solely resident in a qualifying territory, and where distributions form part of a scheme, each company in the chain is also resident in a qualifying territory or the scheme is not designed solely to obtain a tax advantage.