Taxes Consolidation Act 1997 section 753

Restriction on relief for losses by repayment of tax in case of dividends paid out of accumulated profits

Section 753 prevents non-financial traders from using trading losses to obtain tax relief in respect of dividends received as part of a dividend stripping arrangement.

• Where an ordinary trader (not a financial concern) receives a dividend of the type caught by the dividend stripping rules in section 752, special restrictions apply to loss relief claims.
• For income tax purposes, the gross amount of any stripped dividend and any associated tax credit are excluded when calculating repayments of tax under loss relief provisions.
• For corporation tax purposes, the gross amount of the stripped dividend is similarly excluded from the income or profits against which trading losses may be set off.
• The effect is to ensure that non-financial traders cannot exploit trading losses to shelter income derived from dividend stripping transactions.