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LP 4: Continuity rules for carrying credits forward
or “Rules for companies to keep using their unused tax credits”
You could also call this:

“Rules for companies paying extra dividends and tax credits”

When a company pays a supplementary dividend, certain rules still apply as if the company hadn’t paid it. These rules are called the benchmark dividend rules. They are found in another part of the law called section OB 61. There are also rules about imputation arrangements to get a tax advantage. These are in sections GB 35 and GB 36.

There’s a limit on how much imputation credit can be attached to a dividend. This limit is called the maximum permitted ratio. It’s explained in section OB 60(5). When working out this limit, you need to pretend the imputation credit is bigger by the amount of the related supplementary dividend.

Sometimes, there might be special rules for tax credits for non-resident investors. These are explained in section OZ 12. These special rules might change how the other rules work.

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Next up: LP 6: Deriving supplementary dividend and breach of terms of trust

or “Rules for paying extra dividends on some shares or to trust beneficiaries”
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Part L Tax credits and other credits
Tax credits for supplementary dividends

LP 5Application of benchmark dividend rules and imputation credit ratio

  1. The benchmark dividend rules in section OB 61 (ICA benchmark dividend rules) and sections GB 35 and GB 36 (which relate to imputation arrangements to obtain a tax advantage) apply as if the company had never paid the supplementary dividend.

  2. The maximum permitted ratio referred to in section OB 60(5) (Imputation credits attached to dividends) and sections GB 35 and GB 36 apply to a dividend as if the imputation credit attached to the dividend were increased by an amount equal to the related supplementary dividend.

  3. Section OZ 12 (Tax credits for non-resident investors) may apply to modify this section.

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Notes
  • Section LP 5(1): amended, on , by section 164 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section LP 5(3) heading: inserted (with effect on 1 April 2008), on , by section 72 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
  • Section LP 5(3): added, on , by section 451 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).