Income Tax (Trading and Other Income) Act 2005 section 398

Increase in amount or value of dividends where tax credit available

Section 398 dealt with the grossing up of dividend income where a tax credit was available, so that the taxable amount included the tax credit as well as the cash dividend received.

• Where a dividend or other distribution carried an associated tax credit, the taxable amount was the cash dividend plus the tax credit — effectively a grossed-up figure.
• This grossing-up applied for all income tax purposes, including distributions received by members of Lloyd's.
• The rule did not apply to dealers in securities, who instead brought only the net (cash) amount of the distribution into their trading profit calculations.
• This provision was repealed by the Finance Act 2016, which replaced the dividend tax credit regime with a new dividend allowance and revised dividend tax rates from April 2016.