Finance Act 1994 (c. 9)

(The document as of February, 2008)

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(5) Where there is a foreign income dividend only part of which is at the material time matched as mentioned in subsection (4) above, the part of the dividend which at that time is so matched shall be treated for the purposes of this section as a separate dividend and, accordingly, as a matched foreign income dividend.

(6) The company may elect that matched foreign income dividends paid by it in the relevant period are qualifying foreign income dividends only if the amount found under paragraph (a) of subsection (7) below exceeds the amount found under paragraph (b) of that subsection; and where there is such an excess the election may only be made as regards matched foreign income dividends whose total amount is the same as or less than the amount of the excess.

(7) The amounts referred to in subsection (6) above are--

(a) the total amount of foreign income dividends paid by the company in the relevant period (other than excluded dividends);

(b) the total amount of foreign income dividends received (or treated for the purposes of section 246F as received) by the company in the relevant period;

and for the purposes of this subsection an excluded dividend is a foreign income dividend which by virtue of section 246G(2) is not capable of being matched.

(8) A matched foreign source profit is a foreign source profit of which a matched distributable foreign profit forms part; and for the purposes of this subsection "a matched distributable foreign profit" means a distributable foreign profit of the company the whole or part of which is, at the material time, matched with a qualifying foreign income dividend, or with part of such a dividend, or with different such dividends or parts.

(9) Where the matched foreign source profit is a foreign source profit of which a partly matched distributable foreign profit forms part, for the purposes of any calculation required by subsections (1) and (2) above the amount of the matched foreign source profit shall be taken to be reduced by an amount which bears to the full amount of the matched foreign source profit the same proportion as the unmatched part of the distributable foreign profit bears to the amount of the distributable foreign profit.

(10) For the purposes of subsection (9) above--

(a) "a partly matched distributable foreign profit" means a distributable foreign profit of the company part of which is not, at the material time, matched as mentioned in subsection (8) above, and

(b) "the unmatched part of the distributable foreign profit" shall be construed accordingly.

(11) For the purposes of this section--

(a) "the relevant period" shall be construed in accordance with section 246N(1);

(b) "the material time" means the time at which the claim mentioned in section 246N(7) is made.

(12) References in this section to matching shall be construed in accordance with sections 246J to 246M.

(13) Section 238(4) shall apply for the purposes of this section.

246Q Repayment or set-off: supplementary

(1) Subsections (2) and (3) below shall have effect to determine whether the amount which is the smaller of the amounts found under section 246N(4) is to be repaid, set off, or partly repaid and partly set off.

(2) If at the time when it falls to be determined whether the amount mentioned in subsection (1) above is to be repaid or set off--

(a) advance corporation tax paid (or treated for the purposes of section 239 as paid) by the company in respect of distributions made by it in the relevant period has so far as possible been set against its liability to corporation tax for the period under section 239(1), but

(b) the company's liability to corporation tax for the period is to any extent undischarged,

the amount mentioned in subsection (1) above shall so far as possible be set off against the company's liability to corporation tax for the relevant period (and an amount of that liability equal to the amount so set off shall accordingly be discharged); and any excess of the amount mentioned in subsection (1) above over the amount so set off shall be repaid.

(3) Where paragraph (a) of subsection (2) above applies but paragraph (b) of that subsection does not, the whole of the amount mentioned in subsection (1) above shall be repaid.

(4) No amount shall be repayable under section 246N and this section until the expiry of nine months from the end of the relevant period.

(5) An amount of advance corporation tax which has been dealt with under section 246N and this section--

(a) shall not be set off under section 239(1) against the company's liability to corporation tax for any accounting period;

(b) shall not be available for the purposes of a claim under section 240.

(6) A return made by the company for the relevant period under section 11 of the Management Act, or an amendment of such a return, shall be treated as a claim for the purposes of section 246N and this section if the return or (as the case may be) the amendment contains such particulars as the inspector may require.

(7) A claim for those purposes which is not made by means of a return under section 11 of the Management Act, or by means of an amendment of such a return, shall be supported by such particulars as the inspector may require.

(8) In a case where--

(a) a claim is made under section 246N and this section, and

(b) by virtue of the claim, an amount of advance corporation tax is repaid or set off which has already been set off by virtue of section 239(4) against the company's corporation tax liability for an accounting period falling after the accounting period to which the claim relates,

the set-off by virtue of section 239(4) of that amount shall be treated for the purposes of section 252 as if it ought not to have been made.

(9) In determining for the purposes of subsection (8) above whether an amount repaid or set off by virtue of a claim under section 246N and this section is an amount which has already been set off against the company's corporation tax liability for an accounting period, amounts of advance corporation tax repaid or set off by virtue of that claim shall be treated as having been set off against that liability only after any other amounts of advance corporation tax that were capable of being set off against that liability have been taken into account.

(10) Where section 252 applies by virtue of this section the reference in subsection (5) of that section to the Management Act shall be treated as not including a reference to section 34 of that Act.

(11) In this section "the relevant period" shall be construed in accordance with section 246N(1).

246R Supplementary claims

(1) This section applies where--

(a) a claim is made under sections 246N and 246Q, and

(b) at any time after the claim is made the company makes an election under section 246J(5) or 246K(10) matching profits with dividends paid in the accounting period to which the claim relates.

(2) The company may as regards that accounting period make a further claim under sections 246N and 246Q (a supplementary claim) so as to take account of the election.

(3) Subsections (5) and (6) below shall apply in determining for the purposes of the supplementary claim the amount of notional foreign source advance corporation tax for the accounting period to which that claim relates.

(4) In subsections (5) and (6) below a "previously counted dividend" means a foreign income dividend (or part of one) which was included in an election made by the company under section 246P for the purposes of an earlier claim as regards the accounting period (and which, accordingly, was treated as a qualifying foreign income dividend for those purposes).

(5) In applying section 246P for the purposes of the supplementary claim, a previously counted dividend shall be treated as not being a qualifying foreign income dividend notwithstanding the election mentioned in subsection (4) above; and the company may not include the previously counted dividend in any further election made under section 246P for the purposes of the supplementary claim.

(6) In relation to an election which the company proposes to make under section 246P for the purposes of the supplementary claim, section 246P(6) shall have effect as if for the reference to matched foreign income dividends whose total amount is the same as or less than the amount of the excess there mentioned there were substituted a reference to matched foreign income dividends whose total amount, when added to the total amount of the previously counted dividends, gives an amount which is equal to or less than the amount of that excess.

(7) A company may make more than one supplementary claim as regards any accounting period.

International headquarters companies

246S International headquarters companies

(1) For the purposes of this Chapter a company is an international headquarters company in an accounting period if--

(a) at least one of the first three conditions (set out in subsections (2) to (5) below) is fulfilled, and

(b) the fourth condition (set out in subsection (7) below) is fulfilled;

but the fourth condition need not be fulfilled if the second condition is fulfilled.

(2) The first condition is that--

(a) the company is wholly owned by another company throughout the accounting period, and

(b) that other company is a foreign held company in the accounting period.

(3) The second condition is that--

(a) the company is wholly owned by another company throughout the accounting period,

(b) that other company is not resident in the United Kingdom at any time in the accounting period,

(c) throughout the accounting period, and the period of 12 months immediately preceding it, the shares in that other company are quoted in the official list of a recognised stock exchange other than a stock exchange in the United Kingdom,

(d) at a time falling within the accounting period or the period of 12 months immediately preceding it, shares in that other company have been the subject of dealings on a recognised stock exchange other than a stock exchange in the United Kingdom, and

(e) throughout the accounting period, and the period of 12 months immediately preceding it, the shares in that other company are not quoted in the official list of a recognised stock exchange in the United Kingdom;

but this is subject to subsection (8) below.

(4) For the purposes of subsection (3)(e) above, shares that (apart from this subsection) would be regarded as quoted in the official list of a recognised stock exchange shall be regarded as not being so quoted if the issuer of the shares is not subject, in relation to them, to the full requirements applicable by virtue of listing rules to the listing of shares on that exchange; and in this subsection "listing rules" shall be construed in accordance with section 142(6) of the [1986 c. 60.] Financial Services Act 1986.

(5) The third condition is that--

(a) at each given time in the accounting period each shareholder of the company owns at least 5 per cent. of the company's share capital, and

(b) the test mentioned in subsection (6) below is satisfied.

(6) The test is that at each given time in the accounting period at least 80 per cent. of the company's share capital is owned by--

(a) persons who are not companies and who are not resident in the United Kingdom at any time in the accounting period,

(b) companies which are foreign held companies in the accounting period, or

(7) The fourth condition is that at each given time in the accounting period not more than 20 per cent. of the company's ordinary share capital is ultimately owned by persons who are not companies and are resident in the United Kingdom; and where any shares are not directly owned by a person who is not a company their ultimate ownership shall be found by tracing ownership through any corporate holders to persons who are not companies on such basis as is reasonable.

(8) Notwithstanding subsection (3) above, the second condition shall also be treated as fulfilled in relation to a company (the company concerned) and an accounting period if--

(a) the company concerned is throughout the accounting period wholly owned by another company, and that other company is throughout the period wholly owned by a company which satisfies the conditions set out in subsection (3)(b) to (e) above,

(b) there are two or more companies (intermediary companies) which throughout the accounting period beneficially own between them all the share capital of the company concerned, and there is another company which throughout the period wholly owns all the intermediary companies and which satisfies the conditions set out in subsection (3)(b) to (e) above, or

(c) there are two or more companies (relevant companies) which throughout the accounting period beneficially own between them all the share capital of the company concerned, and one of the relevant companies is a company which throughout the period wholly owns all the other relevant companies and which satisfies the conditions set out in subsection (3)(b) to (e) above;

and in determining for the purposes of this subsection whether a particular company satisfies the conditions set out in subsection (3)(b) to (e) above, references in subsection (3)(b) to (e) to "that other company" shall be construed as references to that particular company.

(9) Where a company pays a foreign income dividend, for the purposes of this Chapter it may treat itself as an international headquarters company if--

(a) in the company's opinion it is likely to be an international headquarters company in the accounting period in which the dividend is paid, and

(b) in a case where the dividend is paid in the company's second accounting period or a subsequent accounting period, it is an international headquarters company in the immediately preceding accounting period;

and for the purposes of paragraph (a) above the company's opinion held at the time the dividend is paid is to be taken.

(10) For the purposes of this section a company is a foreign held company in an accounting period if--

(a) at each given time in the accounting period at least 80 per cent. of the company's share capital is owned by persons who are not resident in the United Kingdom at any time in the accounting period, or

(b) throughout the accounting period the company is wholly owned by another company and at each given time in the accounting period at least 80 per cent. of that other company's share capital is owned by persons who are not resident in the United Kingdom at any time in the accounting period.

(11) For the purposes of this section a company wholly owns another company if the first company is the beneficial owner of all the share capital of the second company.

(12) For the purposes of this section the question whether a person owns a particular percentage of a company's share capital at a particular time shall be determined by--

(a) assuming that a general meeting of the company is held at that time;

(b) taking the number of votes carried by the company's share capital and capable of being cast at such a meeting;

(c) taking the number of those votes capable of being so cast by the person concerned by virtue of the company's share capital beneficially owned by him;

(d) expressing the number found under paragraph (c) above as a percentage of the number found under paragraph (b) above;

(e) taking the percentage found under paragraph (d) above as the percentage of the company's share capital owned by that person at that time.

(13) Subsection (12) above shall not apply for the purposes of subsection (7) above; and in subsection (7) references to ownership shall be construed as references to beneficial ownership.

246T Liability to pay ACT displaced

(1) This section applies where--

(a) a company pays a foreign income dividend in an accounting period, and

(b) at the time it pays the dividend the company treats itself as an international headquarters company by virtue of section 246S(9).

(2) The company shall not be liable to pay advance corporation tax in respect of the dividend.

(3) This section shall have effect subject to section 246V.

246U Settlement of liability by IHC as to ACT

(1) This section applies where--

(a) at any time when it pays a dividend in an accounting period a company treats itself as an international headquarters company by virtue of section 246S(9), and

(b) the company is an international headquarters company in the accounting period.

(2) If amount A exceeds amount B, the company shall be liable to pay an amount equal to the excess as if the amount were advance corporation tax payable in respect of a distribution made by the company in the last return period falling within the accounting period; and "return period" here has the same meaning as in Schedule 13.

(3) If amount B exceeds amount A, an amount equal to the excess shall be paid to the company in accordance with this section; and the payment shall be treated as if it were a repayment of advance corporation tax which--

(a) was paid by the company in respect of distributions made by it in the accounting period, and

(b) falls to be repaid under sections 246N and 246Q.

(4) Amount A is the total amount of the advance corporation tax which by virtue of section 246T and paragraph 3A of Schedule 13 the company is not liable to pay, and has not paid, in respect of dividends paid by it in the accounting period.

(5) Amount B is the amount (if any) of the advance corporation tax which would be required to be repaid, or set off, or partly repaid and partly set off, under sections 246N and 246Q if the company--

(a) had not treated itself as an international headquarters company at any time in the accounting period, and

(b) had, at the expiry of nine months from the end of the accounting period, made a claim as regards the accounting period in accordance with sections 246N and 246Q.

(6) Where an amount of advance corporation tax actually paid by the company in respect of qualifying distributions made by it in the accounting period has been dealt with under section 239(3), or the benefit of such an amount has been surrendered under section 240, in applying section 246N(5)(c) and (d) by virtue of subsection (5) above it shall be assumed that an equivalent amount of advance corporation tax would have been so dealt with or (as the case may be) that the benefit of an equivalent amount of advance corporation tax would have been so surrendered.

(7) No amount shall be paid under subsection (3) above unless the company makes a claim for payment; and--

(a) a return made by the company for the accounting period under section 11 of the Management Act, or

(b) an amendment of such a return,

shall be treated as a claim for payment if the return or (as the case may be) the amendment contains such particulars as the inspector may require.

(8) A claim which is not made by means of a return under section 11 of the Management Act, or by means of an amendment of such a return, shall be supported by such particulars as the inspector may require.

(9) No amount shall be payable under subsection (3) above until the expiry of nine months from the end of the accounting period.

246V Settlement of liability by non-IHC as to ACT

(1) This section applies where--

(a) at any time when it pays a dividend in an accounting period a company treats itself as an international headquarters company by virtue of section 246S(9), and

(b) the company is not an international headquarters company in the accounting period.

(2) Section 246T shall not apply, and shall be treated as never having applied, as regards the dividend.

(3) Sections 246N and 246Q shall apply as if the company had not treated itself as an international headquarters company at any time in the period by virtue of section 246S(9).

246W Payments and repayments where further matching takes place

(1) Subsection (2) below applies where--

(a) a company pays an amount under section 246U(2) as regards an accounting period,

(b) the company makes an election under section 246J(5) or 246K(10) matching profits with dividends paid in that accounting period, and

(c) had the election been made before the relevant time, the company would not have been required to pay some or all of the amount mentioned in paragraph (a) above.

(2) The company shall be entitled to repayment of so much of the amount mentioned in subsection (1)(a) above as it would not have been required to pay if the election had been made before the relevant time.

(3) Subsection (4) below applies where--

(a) a company either pays an amount under section 246U(2) as regards an accounting period or is paid an amount under section 246U(3) as regards the period,

(b) the company makes an election under section 246J(5) or 246K(10) matching profits with dividends paid in that accounting period, and

(c) had the election been made before the relevant time, the company would have been entitled under section 246U(3) to be paid an amount which was not in fact paid to it.

(4) The company shall be entitled to payment of the amount mentioned in subsection (3)(c) above.

(5) Any repayment under subsection (2) above shall (without prejudice to section 246U(2)) be treated as if it were a repayment of advance corporation tax which--

(a) was paid by the company in respect of a distribution made by it in the last return period falling within the accounting period mentioned in subsection (1) above, and

(b) falls to be repaid under sections 246N and 246Q.

(6) In relation to a repayment under subsection (2) above which by virtue of subsection (5) above is treated as a repayment of advance corporation tax, the material date for the purposes of section 826 shall be the date when advance corporation tax in respect of distributions made by the company in the return period mentioned in subsection (5) above became (or, as the case may be, would have become) due and payable; and accordingly subsection (2A) of section 826 shall not apply in relation to the repayment.

(7) Any payment under subsection (4) above shall be treated as if it were a repayment of advance corporation tax which--

(a) was paid by the company in respect of distributions made by it in the accounting period mentioned in subsection (3) above, and

(b) falls to be repaid under sections 246N and 246Q.

(8) Subsections (7) and (8) of section 246U shall apply in relation to payments and repayments under this section as they apply in relation to payments under section 246U(3).

(9) For the purposes of this section--

(a) "the relevant time" means the expiry of nine months from the end of the accounting period mentioned in subsection (1) or (3) above;

(b) "return period" has the same meaning as in Schedule 13.

Adjustments

246X Adjustments where profits or foreign tax altered

(1) This section applies where a company is paid or repaid an amount under any provision of this Chapter, or sets off under any such provision an amount against a liability of the company to corporation tax, and either--

(a) there is any alteration of the profits of a company for an accounting period which renders the payment or repayment, or the amount set off, excessive or insufficient, or

(b) there is any alteration of an amount of tax payable under the laws of a territory outside the United Kingdom which renders the payment or repayment, or the amount set off, excessive or insufficient.

(2) Where there is any such alteration as is mentioned in subsection (1) above the company may revise any election made under section 246J or 246K or 246P in such manner as is just and reasonable having regard to the alteration.

(3) Where there is any such alteration as is mentioned in subsection (1) above, then such adjustments shall be made of any calculation required by this Chapter as are just and reasonable having regard to the alteration and to any revision made under subsection (2) above; and payments or repayments shall be made accordingly.

Application of this Chapter

246Y Application of this Chapter

This Chapter shall have effect in relation to--

(a) any dividend paid on or after 1st July 1994;

(b) any foreign source profit consisting of income for, or a chargeable gain for, an accounting period beginning on or after 1st July 1993. "

Part II Liability for and collection of advance corporation tax

2 In section 14 of the Taxes Act 1988 (advance corporation tax and qualifying distributions) in subsection (3) for the words "section 241" there shall be substituted "sections 241 and 246F".

3 (1) Schedule 13 to the Taxes Act 1988 (collection of advance corporation tax) shall be amended as follows.

(2) In paragraph 1 (duty to make returns) for sub-paragraph (1) there shall be substituted--

" (1) A company shall for each of its accounting periods make, in accordance with this Schedule, returns to the collector of--

(a) the franked payments made and franked investment income received by it in that period,

(b) the foreign income dividends paid and foreign income dividends received by it in that period, and

(c) the advance corporation tax (if any) payable by it in respect of the franked payments made and foreign income dividends paid by it in that period;

and references in this Schedule to foreign income dividends shall be construed in accordance with Chapter VA of this Part. "

(3) In paragraph 1, for sub-paragraph (4) there shall be substituted--

" (4) Subject to paragraphs 4(2), 4A(2) and 7(3) below, no return need be made under this Schedule by a company for any period in which it has--

(a) made no franked payments, and

(b) paid no foreign income dividends. "

(4) In paragraph 2 (contents of return) for sub-paragraph (1) there shall be substituted--

" (1) Subject to paragraphs 7(2), 3A(2) and 9A(2) below, the return made by a company for any return period shall show--

(a) the amount of the franked payments, if any, made by it in that period,

(b) the amount of franked investment income, if any, received by it in that period,

(d) the amount of the foreign income dividends, if any, paid by it in that period,

(e) the amount of the foreign income dividends, if any, received by it in that period, and

(f) if any advance corporation tax is payable in respect of the foreign income dividends paid, the amount thereof. "

(5) In paragraph 2, after sub-paragraph (4) there shall be inserted--

" (5) For the purposes of paragraph (e) of sub-paragraph (1) above the amount of foreign income dividends received by a company in a return period shall be treated as including the excess, if any, of--

(a) any amount carried forward under section 246F(3) to the accounting period for which the return is made, and

(b) any amount of foreign income dividends received by the company in that accounting period but before the beginning of the return period,

over the amount of any foreign income dividends paid by the company in that accounting period but before the beginning of the return period.

(6) For the purposes of paragraph (f) of sub-paragraph (1) above advance corporation tax shall be payable in respect of foreign income dividends paid in a return period if--

(a) the amount shown under paragraph (d) of that sub-paragraph exceeds the amount shown under paragraph (e) of that sub-paragraph, or

(b) no amount is shown under paragraph (e) of that sub-paragraph;

and the amount of that tax shall be calculated at the rate of advance corporation tax in force for the financial year in which the return period ends on an amount equal to that excess or, if no amount is shown under sub-paragraph (1)(e) above, to the amount shown under sub-paragraph (1)(d) above. "

(6) In paragraph 3 (payment of tax)--

(a) in sub-paragraph (1) after the words "franked payments" there shall be inserted "and foreign income dividends", and

(b) in sub-paragraph (3) after the words "franked payment" there shall be inserted "or foreign income dividend".

(7) After paragraph 3 there shall be inserted--

" International headquarters companies

3A (1) This paragraph and paragraph 3B below apply where--

(a) a company pays a foreign income dividend in a return period, and

(b) at the time it pays the dividend the company treats itself as an international headquarters company by virtue of section 246S(9).

(2) The return made by the company for the return period--

(a) shall state that the company has so treated itself;

(b) shall show the basis on which it has so treated itself;

(d) shall state separately that the dividend was paid and show its amount.

(3) The dividend shall be treated for the purposes of section 246F(1) and (2), paragraph 2(5) above and paragraph 4A below as if it had not been paid.

3B (1) Without prejudice to paragraph 3 above, if at any time before the end of the accounting period in which the return period mentioned in paragraph 3A(1) above falls the inspector is not satisfied that there was a reasonable basis for the company treating itself as mentioned in paragraph 3A(1) he may make an assessment on the company to the best of his judgment; and any advance corporation tax due under an assessment made by virtue of this sub-paragraph shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if the company had not so treated itself.

(2) Where an assessment which takes account of the dividend mentioned in paragraph 3A(1) above is made under sub-paragraph (1) above, then, subject to any appeal--

(a) the company shall be deemed for the purposes of Chapter VA of this Part not to have treated itself as an international headquarters company by virtue of section 246S(9) at the time it paid the dividend;

(b) paragraph 3A(3) above shall not apply to the dividend.

(3) In a case where--

(a) the company is not an international headquarters company in the accounting period in which the return period mentioned in paragraph 3A(1) above falls, and

(b) as regards any relevant return period amount X exceeds amount Y,

after the end of the accounting period the inspector may make an assessment on the company for an amount of advance corporation tax equal to the excess; and a relevant return period is a return period falling within the accounting period in question.

(4) For the purposes of sub-paragraph (3) above--

(a) amount X is the amount of advance corporation tax which, if the company had not treated itself as an international headquarters company at any time in the accounting period and had made a return for the relevant return period under paragraph 2 above accordingly, would have been payable by the company in respect of the relevant return period under paragraph 2(6) above;

(b) amount Y is the aggregate of the amounts mentioned in sub-paragraph (5) below.

(5) The amounts referred to in sub-paragraph (4)(b) above are--

(a) the amount (if any) of advance corporation tax which was in fact payable by the company under paragraph 2(6) above in respect of the relevant return period,

(b) any amount of advance corporation tax to which the company has been assessed under sub-paragraph (1) above in respect of that period, and

(c) any amount of advance corporation tax to which the company has been assessed under paragraph 3 above in respect of that period and which is attributable to foreign income dividends.

(6) Any advance corporation tax due under an assessment made by virtue of sub-paragraph (3) above shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if the company had not treated itself as an international headquarters company at any time in the accounting period. "

(8) In paragraph 4 (receipt of franked investment income after payment of advance corporation tax) in sub-paragraph (2) after the words "any franked payments" there shall be inserted ", or paid any foreign income dividends,".

(9) After paragraph 4 there shall be inserted--

" Receipt of foreign income dividends after payment of advance corporation tax

4A (1) This paragraph shall have effect where--

(a) a return has been made of foreign income dividends paid in any return period falling within an accounting period and advance corporation tax has been paid in respect of those dividends, and

(b) the company receives foreign income dividends after the end of the return period but before the end of the accounting period.

(2) The company shall make a return under paragraph 1 above for the return period in which the foreign income dividends are received whether or not it has made any franked payments, or paid any foreign income dividends, in that period, and, subject to sub-paragraphs (3) to (5) below, shall be entitled to repayment of any advance corporation tax paid (and not repaid) in respect of foreign income dividends paid in the accounting period in question.

(3) If no foreign income dividends were paid by the company in the return period for which a return is made by virtue of sub-paragraph (2) above (the relevant return period), the amount of the repayment shall not exceed the amount which would have been payable under paragraph 2 above as regards the relevant return period if the company--

(a) had paid in the period foreign income dividends of an amount equal to the foreign income dividends actually received by it in the period and had paid in the period no other foreign income dividends or franked payments, and

(b) had received in the period no foreign income dividends or franked investment income.

(4) If at least one foreign income dividend was paid by the company in the relevant return period and the amount of the foreign income dividends received by it in the period exceeds the amount of the foreign income dividends paid by it in the period, the amount of the repayment shall not exceed the amount which would have been payable under paragraph 2 above as regards the relevant return period if the company--

(b) had received in the period foreign income dividends of an amount equal to the foreign income dividends actually paid by it in the period and had received in the period no other foreign income dividends or franked investment income.

(5) If at least one foreign income dividend was paid by the company in the relevant return period and the amount of the foreign income dividends paid by it in the period exceeds the amount of the foreign income dividends received by it in the period, the company shall not be entitled to a repayment under this paragraph as regards the relevant return period. "

(10) After paragraph 6 there shall be inserted--

" Claims for set-off in respect of foreign income dividends received by a company

6A (1) Where under paragraph 2 or 4A above foreign income dividends received by a company fall to be taken into account in determining--

(a) whether advance corporation tax is payable or repayable, or

(b) the amount of such tax which is payable or repayable,

the inclusion of the foreign income dividends in the appropriate return shall be treated as a claim by the company to have them so taken into account, and any such claim shall be supported by such evidence as the inspector may reasonably require.

(2) Paragraph 6 above shall apply in relation to a claim under this paragraph as it applies in relation to a claim under paragraph 5 above. "

(11) In paragraph 7 (qualifying distributions which are not payments and payments of uncertain nature) in sub-paragraph (3) for the words from "and if" to "that period" there shall be substituted "and if in that period no franked payment (apart from that distribution or payment) is made and no foreign income dividend is paid".

(12) After paragraph 9 there shall be inserted--

" Manufactured foreign income dividends

9A (1) This paragraph applies in any case where, by virtue of paragraph 2(2) and (6) of Schedule 23A, a company is treated as having paid a foreign income dividend.

(2) No amount shall be shown under paragraph 2(1)(d) above in respect of the dividend which is treated as having been paid, but the company's return for the return period in which the dividend is treated as having been paid shall state separately that it was treated as paid and shall show its amount. "

(13) This paragraph shall have effect in relation to any return period ending after 30th June 1994.

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