Where gains are chargeable to income tax on an individual or body of trustees, tax at the basic rate is treated as having been paid so that only the difference between basic and higher or additional rates (in the case of individuals) or between basic rate and the special trust rate (in the case of discretionary trustees) will or may be payable. The notional basic rate tax is not repayable in any circumstances (ITTOIA 2005, s. 530(1), (2)).

However, the amount on which basic rate tax is treated as paid is reduced by the amount of any deductions made at Steps 2 or 3 of the prescribed method of calculating income tax liabilities (see ¶148-400) (ITTOIA 2005, s. 530(3)–(5)).

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