1

Where a person is liable to income tax on a CD distribution, the person's liability to income tax on a subsequent non-CD distribution is reduced in accordance with this section if the non-CD distribution consists of a repayment of—

a

the share capital, or

b

the principal of the security,

which constituted the CD distribution.

1A

The reduction is—

a

the amount of income tax to which the person is liable on the CD distribution, or

b

if lower, the amount of income tax to which the person is liable on the non-CD distribution.

1B

For the purposes of calculating the amounts mentioned in subsection (1A)(a) and (b) assume—

a

that the CD distribution is the lowest part of the person's dividend income in the tax year (“year 1”) in which it is made,

b

that the non-CD distribution, if it is made in year 1, is the part of the person's dividend income in year 1 that is next lowest after the CD distribution, and

c

that the non-CD distribution, if it is made after year 1, is the lowest part of the person's dividend income in the tax year in which it is made.

—

“CD distribution” means a distribution which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) of CTA 2010 (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company),

“non-CD distribution” means a distribution which is not a CD distribution, and

“security”