Annex 1: Minor changes in the law made by the Act: Change 103: Charge on income treated as arising from foreign holdings: foreign dividend coupons: section 570
This change clarifies two points in rewriting section 18(3B) of ICTA. First, that a “bank in the United Kingdom” means a bank’s office in the United Kingdom, whether the bank is resident in the United Kingdom or abroad. Second, that a “dealer in coupons in the United Kingdom” means a coupon dealer carrying on business in the United Kingdom, whether the dealer is resident in the United Kingdom or abroad.
Section 18(3B) of ICTA provides that a charge under Schedule D Cases IV or V arises on the sale or other realisation of coupons for foreign dividends by a “…bank in the United Kingdom…” which pays over the proceeds or carries them to an account. This is interpreted by the Inland Revenue to mean the office in the United Kingdom of a bank, whether that bank is incorporated in the United Kingdom or abroad. Similarly, a sale of such coupons to a “…dealer in coupons in the United Kingdom…” is taken to mean a coupon dealer carrying on business in the United Kingdom, whether resident in the United Kingdom or abroad.
Section 570 is based principally on section 18(3) and (3B) of ICTA. It treats income as arising from foreign holdings where a dividend coupon attached to the holding is (a) sold or otherwise realised by a bank in the United Kingdom, or (b) sold to a coupon dealer in the United Kingdom by someone other than a bank or coupon dealer. So subsection (3) of the section refers to “…a bank’s office in the United Kingdom…” and subsection (4) refers to a person “…dealing in coupons in the United Kingdom…” in rewriting section 18(3B) of ICTA.
Where section 18(3B) of ICTA does not apply then section 730 of ICTA may apply to tax the coupon sales to income tax under Schedule D Case VI. An alternative interpretation to “in the United Kingdom” may, depending on circumstances, take a sale of coupons out of one provision and into another. Whether more tax is paid as a result of being taxed under section 570 of this Act or section 730 of ICTA depends on the taxpayer’s own circumstances.
This change is adverse to some taxpayers and favourable to others in principle. But it is expected to have no practical effect as it is in line with current practice.