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LE 5: Beneficiaries of trusts
or “How tax credits work for trust beneficiaries receiving dividends”
You could also call this:

“How tax credits for partners are calculated when partnerships receive dividends”

If you are a partner in a partnership and you have a tax credit under section LE 1, this section applies to you when your partnership receives a dividend with an imputation credit attached.

Your tax credit is limited to an amount calculated using a special formula. This formula takes into account your income as a partner, the partnership’s total income, the imputation credits the partnership received, and any supplementary dividends you might have received as a non-resident partner.

The formula looks at your share of the partnership’s income compared to the total partnership income. It then applies this ratio to the partnership’s imputation credits, after subtracting any supplementary dividends you received as a non-resident partner.

When calculating your income and the partnership’s income for this formula, you don’t include imputation credits attached to dividends or supplementary dividends received by non-resident partners. This ensures the calculation focuses on the main income received by the partnership and its partners.

The partnership’s imputation credits used in the formula include all imputation credits and supplementary dividends received by all partners for the tax year.

This method of calculating your tax credit ensures that you receive a fair share of the imputation credits based on your contribution to the partnership’s income.

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Next up: LE 7: Credit transfer notices

or “How to receive a tax credit for lending shares”
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Part L Tax credits and other credits
Tax credits for imputation credits

LE 6Partners in partnerships

  1. This section applies when a person who has a tax credit under section LE 1 is a partner in a partnership and, through the partnership, derives a dividend with an imputation credit attached.

  2. The person’s credit is limited to an amount calculated using the formula—

    (partner's income ÷ partnership income)× (partnership imputation credits − partner's supplementary dividend).

    Where:

    • In the formula,—

    • partner’s income is the total assessable income of the person for the tax year derived as a partner of the partnership excluding—
      1. an imputation credit attached to a dividend derived by the person:
        1. a supplementary dividend derived by the person as a non-resident partner of the partnership:
        2. partnership income is the total assessable income for the tax year of all the partners of the partnership excluding—
          1. all imputation credits attached to dividends derived by the partners:
            1. all supplementary dividends derived by non-resident partners of the partnership:
            2. partnership imputation credits is the total imputation credits attached to dividends and total supplementary dividends for the tax year derived by all partners of the partnership:
              1. partner’s supplementary dividend is the total supplementary dividends for the tax year derived by the person as a non-resident partner of the partnership.

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                Notes
                • Section LE 6(3)(a)(i): amended, on , by section 155(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section LE 6(3)(b)(i): amended, on , by section 155(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section LE 6 list of defined terms FDP credit: repealed, on , by section 155(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).