- Latest available (Revised)
- Point in Time (01/01/2005)
- Original (As enacted)
Point in time view as at 01/01/2005. This version of this part contains provisions that are not valid for this point in time.
Income and Corporation Taxes Act 1988,
PART VI is up to date with all changes known to be in force on or before 15 August 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.
Changes and effects yet to be applied by the editorial team are only applicable when viewing the latest version or prospective version of legislation. They are therefore not accessible when viewing legislation as at a specific point in time. To view the ‘Changes to Legislation’ information for this provision return to the latest version view using the options provided in the ‘What Version’ box above.
Modifications etc. (not altering text)
C1Pt. 6 modified by Airports Act 1986 (c. 31), s. 77(3) (as substituted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 3 (with Sch. 15))
C2Pt. 6 modified by Gas Act 1986 (c. 44), s. 60(3) (as substituted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 4 (with Sch. 15))
C3Pt. 6 modified by British Steel Act 1988 (c. 35), s. 11(7) (as substituted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 55 (with Sch. 15))
Modifications etc. (not altering text)
C4Pt. 6 Chs. 1-3: power to amend conferred (1.4.2009 with effect in accordance with s. 1329(1) of the affecting Act) by Corporation Tax Act 2009 (c. 4), s. 533(2)(3)(d)
F2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]
Textual Amendments
F1S. 207A inserted (27.7.1993 with application in relation to the year 1993-94 and subsequent years of assessment) by 1993 c. 34, s. 77(1)(2)(5)
M1Except as otherwise provided by the Corporation Tax Acts, corporation tax shall not be chargeable on dividends and other distributions of a company resident in the United Kingdom, nor shall any such dividends or distributions be taken into account in computing income for corporation tax.
Modifications etc. (not altering text)
C5S. 208 excluded (with effect in accordance with s. 230(3) of the excluding Act) by Finance Act 1994 (c. 9), ss. 219(4), 220
C6S. 208 excluded by Finance Act 1994 (c. 9), ss. 219(4A), 220 (as that s. 219(4A) is inserted (with effect in accordance with s. 22(7) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 22(4))
C7S. 208 excluded (27.7.1999) by Commonwealth Development Corporation Act 1999 (c. 20), Sch. 3 paras. 1, 6(2)(a)
C8s. 208 excluded (with effect in accordance with s. 22(7) of the amending Act) by Finance Act1993 (c. 34), s. 171(4A) (as inserted by 1997 c. 58, s. 22(4)),
C9S. 208 modified (with retrospective effect) by Finance (No. 3) Act 2010 (c. 33), Sch. 3 para. 6(1)(2)
Marginal Citations
M1Source—1970 s.239
Modifications etc. (not altering text)
C10Pt. 6 Ch. 2 modified (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), s. 252(1)(3), Sch. 24 para. 14(5)
C11Pt. 6 Ch. 2 modified (19.9.1994) by Coal Industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 13(5) (with s. 40(7), Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.
C12Pt. 6 Ch. 2 modified (8.11.1995) by Gas Act 1995 (c. 45), s. 18(2)(c), Sch. 5 paras. 1, 10(4)
C13Pt. 6 Chs. 1-3: power to amend conferred (1.4.2009 with effect in accordance with s. 1329(1) of the affecting Act) by Corporation Tax Act 2009 (c. 4), s. 533(2)(3)(d)
(1)M2The following provisions of this Chapter, together with section 418, shall, subject to [F3any express exceptions], have effect with respect to the meaning of “distribution” and for determining the persons to whom certain distributions are to be treated as made, but references in the Corporation Tax Acts to distributions of a company shall not apply to distributions made in respect of share capital in a winding up.
(2)In the Corporation Tax Acts “distribution”, in relation to any company, means—
(a)M3any dividend paid by the company, including a capital dividend;
(b)subject to subsections (5) and (6) below, any other distribution out of assets of the company (whether in cash or otherwise) in respect of shares in the company, except so much of the distribution, if any, as represents repayment of capital on the shares or is, when it is made, equal in amount or value to any new consideration received by the company for the distribution;
(c)subject to section 230, any redeemable share capital or any security issued by the company in respect of shares in or securities of the company otherwise than wholly for new consideration, or such part of any redeemable share capital or any security so issued as is not properly referable to new consideration;
(d)M4any interest or other distribution out of assets of the company in respect of securities of the company, where they are securities under which the consideration given by the company for the use of the principal thereby secured represents more than a reasonable commercial return for the use of that principal, except so much, if any, of any such distribution as represents that principal and so much as represents a reasonable commercial return for the use of that principal;
[F4(da)F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]
(e)M5any interest or other distribution out of assets of the company in respect of securities of the company (except so much, if any, of any such distribution as represents the principal thereby secured and except so much of any distribution as falls within [F6paragraph (d) F7. . . ] above), where the securities are—
(i)securities issued as mentioned in paragraph (c) above, but excluding securities issued before 6th April 1965 in respect of shares and securities issued before 6th April 1972 in respect of securities; or
(ii)securities convertible directly or indirectly into shares in the company or securities issued after 5th April 1972 and carrying any right to receive shares in or securities of the company, not being (in either case) securities [F8listed] on a recognised stock exchange nor issued on terms which are reasonably comparable with the terms of issue of securities so [F8listed]; or
(iii)securities under which the consideration given by the company for the use of the principal secured is to any extent dependent on the results of the company’s business or any part of it; or
(iv)F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(v)F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(vi)securities which are connected with shares in the company, and for this purpose securities are so connected if, in consequence of the nature of the rights attaching to the securities or shares and in particular of any terms or conditions attaching to the right to transfer the shares or securities, it is necessary or advantageous for a person who has, or disposes of or acquires, any of the securities also to have, or to dispose of or to acquire, a proportionate holding of the shares [F10or;
(vii)equity notes issued by the company (“the issuing company”) and held by a company which is associated with the issuing company or is a funded company;]
(f)any such amount as is required to be treated as a distribution by subsection (4) below or section 210.
(3)M6Without prejudice to section 254(11), no amount shall be regarded for the purposes of [F11subsection (2)(d)F12. . . ] and (e) above as representing the principal secured by a security issued after 5th April 1972 in so far as it exceeds any new consideration which has been received by the company for the issue of the security.
[F13(3A)Where any security of a company is issued at a premium representing new consideration—
(a)the references in subsection (2)(d)F14. . . and (e) above to so much of any distribution as represents, or is an amount representing, the principal secured by a security shall be construed, in relation to a distribution in respect of the security issued at a premium, as references to the aggregate of—
(i)so much of the distribution as represents, or is an amount representing, that principal, and
(ii)so much of it as represents, or is an amount representing, the premium;
and
(b)the reference in subsection (2)(d) above to so much of any distribution as represents a reasonable commercial return for the use of the principal secured by a security shall be construed, in relation to a distribution in respect of the security issued at a premium, as a reference to the aggregate of—
(i)so much of the distribution as represents a reasonable commercial return for the use of that principal, and
(ii)so much of it as (when regard is had to the extent to which distributions represent the premium) represents a reasonable commercial return for the use of the premium.]
[F15(3AA)If, in the case of any security issued by a company, the amount of new consideration received by the company for the issue of the security exceeds the amount of the principal secured by the security—
(a)the amount of the principal so secured shall be treated for the purposes of paragraph (d) of subsection (2) above as increased to the amount of the new consideration so received; and
(b)subsection (3A) above, so far as relating to that paragraph, shall not have effect in relation to the security;
but this subsection is subject to sections 209A and 209B.]
[F16(3B)For the purposes of subsection (2)(e)(iii) above the consideration given by the company for the use of the principal secured shall not be treated as being to any extent dependent on the results of the company’s business or any part of it by reason only of the fact that the terms of the security provide—
(a)for the consideration to be reduced in the event of the results improving, or
(b)for the consideration to be increased in the event of the results deteriorating.]
(4)M7Where on a transfer of assets or liabilities by a company to its members or to a company by its members, the amount or value of the benefit received by a member (taken according to its market value) exceeds the amount or value (so taken) of any new consideration given by him, the company shall, subject to subsections (5) and (6) below, be treated as making a distribution to him of an amount equal to the difference.
(5)Subsection (4) above shall not apply where the company and the member receiving the benefit are both resident in the United Kingdom and either the former is a subsidiary of the latter or both are subsidiaries of a third company also so resident; and any amount which would apart from this subsection be a distribution shall not constitute a distribution by virtue of subsection (2)(b) above.
(6)M8No transfer of assets (other than cash) or of liabilities between one company and another shall constitute, or be treated as giving rise to, a distribution by virtue of subsection (2)(b) or (4) above if they are companies—
(a)both of which are resident in the United Kingdom and neither of which is a 51 per cent. subsidiary of a company not so resident; and
(b)which, neither at the time of the transfer nor as a result of it, are under common control.
For the purposes of this subsection two companies are under common control if they are under the control of the same person or persons, and for this purpose “control” shall be construed in accordance with section 416.
(7)M9The question whether one body corporate is a subsidiary of another for the purpose of subsection (5) above shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—
(a)of any share capital which it owns directly in a body corporate, if a profit on a sale of the shares would be treated as a trading receipt of its trade; or
(b)of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt; or
(c)of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom.
(8)M10For the purposes of subsection (2)(c) above—
(a)the value of any redeemable share capital shall be taken to be the amount of the share capital together with any premium payable on redemption, or in a winding up, or in any other circumstances; and
(b)the value of any security shall be taken to be the amount of the principal thereby secured (including any premium payable at maturity or in a winding up, or in any other circumstances);
and in determining the amount of the distribution constituted by the issue of any redeemable share capital or any security, the capital or security shall be taken at that value.
[F17(8A)F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8B)F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8C)F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8D)F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8E)F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8F)F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]
[F19(9)For the purposes of subsection (2)(e)(vii) above a security is an equity note if as regards the whole of the principal or as regards any part of it—
(a)the security’s terms contain no particular date by which it is to be redeemed,
(b)under the security’s terms the date for redemption, or the latest date for redemption, falls after the expiry of the permitted period,
(c)under the security’s terms redemption is to occur after the expiry of the permitted period if a particular event occurs and the event is one which (judged at the time of the security’s issue) is certain or likely to occur, or
(d)the issuing company can secure that there is no particular date by which the security is to be redeemed or that the date for redemption falls after the expiry of the permitted period;
and the permitted period is the period of 50 years beginning with the date of the security’s issue.
(10)For the purposes of subsection (2)(e)(vii) above and subsection (11) below a company is associated with the issuing company if—
(a)the issuing company is a 75 per cent. subsidiary of the other company,
(b)the other company is a 75 per cent. subsidiary of the issuing company, or
(c)both are 75 per cent. subsidiaries of a third company.
(11)For the purposes of subsection (2)(e)(vii) above a company is a funded company if there are arrangements involving the company being put in funds (directly or indirectly) by the issuing company or a company associated with the issuing company.]
Textual Amendments
F3Words in s. 209(1) substituted (with effect in accordance with s. 40(11) of the amending Act) by Finance Act 2000 (c. 17), s. 40(9)
F4S. 209(2)(da) inserted (with effect in accordance with s. 87(7)(8) of the amending Act) by Finance Act 1995 (c. 4), s. 87(1)
F5S. 209(2)(da) repealed (with effect in accordance with s. 37 of the repealing Act) by Finance Act 2004 (c. 12), s. 34(1)(a), Sch. 42 Pt. 2(2), Note
F6Words in s. 209(2)(e) substituted (with effect in accordance with s. 87(7)(8) of the amending Act) by Finance Act 1995 (c. 4), s. 87(2)(a)
F7Words in s. 209(2)(e) repealed (with effect in accordance with s. 37 of the repealing Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(2)
F8Words in s. 209(2)(e)(ii) substituted (with effect in accordance with Sch. 38 para. 6(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 38 para. 6(1)(2)(b)
F9S. 209(2)(e)(iv)(v) repealed (with effect in accordance with s. 87(7)(8) of the repealing Act) by Finance Act 1995 (c. 4), s. 87(2)(b), Sch. 29 Pt. 8(12), Note
F10S. 209(2)(e)(vii) and word "or" immediately preceding inserted (16.7.1992 with application where the interest or other distribution is paid after 14.5.1992) by Finance (No. 2) Act 1992 (c. 48), s. 31(1)(4).
F11Words in s. 209(3) substituted (with effect in accordance with s. 87(7)(8) of the amending Act) by Finance Act 1995 (c. 4), s. 87(2)(b)
F12Words in s. 209(3) repealed (with effect in accordance with s. 37 of the repealing Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(2), Note
F13S. 209(3A) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 11 (with Sch. 15)
F14Words in s. 209(3A)(a) repealed (with effect in accordance with s. 37 of the repealing Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(2), Note
F15S. 209(3AA) inserted (with effect in accordance with s. 102(3) of the amending Act) by Finance Act 2002 (c. 23), s. 102(1)
F16S. 209(3B) inserted (with application in accordance with s. 86(1) of the amending Act) by Finance Act 2000 (c. 17), s. 86(1)
F17S. 209(8A)-(8F) inserted (with effect in accordance with s. 87(7)(8) of the amending Act) by Finance Act 1995 (c. 4), s. 87(3)
F18S. 209(8A)-(8F) repealed (with effect in accordance with s. 37 of the repealing Act) by Finance Act 2004 (c. 12), s. 34(1)(b), Sch. 42 Pt. 2(2), Note
F19S. 209(9)-(11) inserted (16.7.1992 with application where the interest or other distribution is paid after 14.5.1992) by Finance (No. 2) Act 1992 (c. 48), s. 31(2)(4).
Modifications etc. (not altering text)
C14S. 209(2)(da)(e)(vii) applied by Finance Act 1996 (c. 8), Sch. 9 para. 11A (as inserted (with effect in accordance with s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 23 para 11 (with s. 81(4)(5), Sch. 23 para. 25))
C15S. 209(2)(b)-(f) excluded (12.12.2006 with effect in accordance with reg. 1(2) of the affecting S.I.) by The Taxation of Securitisation Companies Regulations 2006 (S.I. 2006/3296), regs. 1(1), 16
Marginal Citations
M2Source—1970 s.233(1); 1980 s.45(2)
M3Source—1970 s.233(2)(a), (b), (c); 1972 Sch.22 1, 2(1)
M4Source—1970 s.233(2)(d)(iii); 1972 Sch.22 3(2)
M5Source—1970 s.233(d), (e); 1970(F) Sch.4 6; 1972 Sch.22 3(1)
M6Source—1972 Sch.22 3(3)
M7Source—1970 s.233(3); 1972 Sch.22 4(3)
M8Source—1972 Sch.22 4(1), (2)
M9Source—1970 s.233(4)
M10Source—1972 Sch.22 2(2)
(1)Subsection (3AA) of section 209 does not apply in relation to a security issued by a company (the “issuing company”) if the security is one which to a significant extent reflects dividends or other distributions in respect of, or fluctuations in the value of, shares in one or more companies each of which is—
(a)the issuing company; or
(b)an associated company of the issuing company;
but this subsection is subject to the following provisions of this section.
(2)Subsection (1) above does not prevent subsection (3AA) of section 209 above from applying in relation to a security if—
(a)the issuing company is a bank or securities house;
(b)the security is issued by the issuing company in the ordinary course of its business; and
(c)the security reflects dividends or other distributions in respect of, or fluctuations in the value of, shares in companies falling within paragraph (a) or (b) of subsection (1) above by reason only that the security reflects fluctuations in a qualifying index.
(3)In subsection (2)(c) above “qualifying index” means an index whose underlying subject matter includes both—
(a)shares in one or more companies falling within paragraph (a) or (b) of subsection (1) above, and
(b)shares in one or more companies falling within neither of those paragraphs,
and which is an index such that the shares falling within paragraph (b) above represent a significant proportion of the market value of the underlying subject matter of the index.
(4)In this section—
“bank” has the meaning given by section 840A;
“securities house” means any person—
who is authorised for the purposes of the Financial Services and Markets Act 2000; and
whose business consists wholly or mainly of dealing in financial instruments as principal;
and in paragraph (b) above “financial instrument” has the meaning given by section 349(5) and (6).
(5)For the purposes of this section a company is an “associated company” of another at any time if at that time one has control of the other or both are under the control of the same person or persons.
(6)For the purposes of subsection (5) above, “control”, in relation to a company, means the power of a person to secure—
(a)by means of the holding of shares or the possession of voting power in or in relation to the company or any other company, or
(b)by virtue of any powers conferred by the articles of association or other document regulating the company or any other company,
that the affairs of the company are conducted in accordance with his wishes.
(7)There shall be left out of account for the purposes of subsection (6) above—
(a)any shares held by a company, and
(b)any voting power or other powers arising from shares held by a company,
if a profit on a sale of the shares would be treated as a trading receipt of a trade carried on by the company and the shares are not, within the meaning of Chapter 1 of Part 12, assets of an insurance company’s long-term insurance fund (see section 431(2)).]
Textual Amendments
(1)Subsection (3AA) of section 209 does not at any time apply in relation to a security issued by a company (the “issuing company”) if at that time, or any earlier time on or after 17th April 2002, there are or have been any hedging arrangements that relate to some or all of the company’s liabilities under the security.
(2)Subsection (1) above does not prevent subsection (3AA) of section 209 from applying in relation to a security at any time if—
(a)conditions 1 to 4 below are satisfied in relation to any such hedging arrangements at that time; and
(b)at all earlier times on or after 17th April 2002 when there have been hedging arrangements that relate to some or all of the company’s liabilities under the security, conditions 1 to 4 below were satisfied in relation to those hedging arrangements.
(3)Where subsection (3AA) of section 209 at any time ceases to apply in relation to a security by virtue of this section, subsection (2)(d) of that section shall have effect in relation to the security as from that time as it would have had effect if subsection (3AA) had never applied in relation to the security.
(4)Condition 1 is that the hedging arrangements do not constitute, include, or form part of, any scheme or arrangement the purpose or one of the main purposes of which is the avoidance of tax [F21(including stamp duty or stamp duty land tax)].
(5)Condition 2 is that the hedging arrangements are such that, where for the purposes of corporation tax a deduction in respect of the security falls to be made at any time by the issuing company, then at that time, or within a reasonable time before or after it, any amounts intended under the hedging arrangements to offset some or all of that deduction arise—
(a)to the issuing company; or
(b)to a company which is a member of the same group of companies as the issuing company.
(6)Condition 3 is that the whole of every amount arising as mentioned in subsection (5) above is brought into charge to corporation tax—
(a)by a company falling within paragraph (a) or (b) of that subsection, or
(b)by two or more companies, taken together, each of which falls within paragraph (a) or (b) of that subsection.
(7)Condition 4 is that for the purposes of corporation tax any deductions in respect of expenses of establishing or administering the hedging arrangements are reasonable, in proportion to the amounts required to be brought into charge to corporation tax by subsection (6) above.
(8)For the purposes of this section “hedging arrangements”, in relation to a security, means any scheme or arrangement for the purpose, or for purposes which include the purpose, of securing that an amount of income or gain accrues, or is received or receivable, whether directly or indirectly, which is intended to offset some or all of the amounts which fall to be brought into account, in accordance with generally accepted accounting practice, in respect of amounts accruing or falling to be paid in accordance with the terms of the security.
(9)Any reference in this section to two companies being members of the same group of companies is a reference to their being members of the same group of companies for the purposes of Chapter 4 of Part 10 of this Act (group relief).]
Textual Amendments
F20Ss. 209A, 209B inserted (with effect in accordance with s. 102(3) of the amending Act) by Finance Act 2002 (c. 23), s. 102(2)
F21Words in s. 209B(4) substituted (10.7.2003 subject to Sch. 19 to the amending Act) by Finance Act 2003 (c. 14), Sch. 18 para. 3(2)
M11(1)Where a company—
(a)repays any share capital or has done so at any time after 6th April 1965, and
(b)at or after the time of that repayment issues any share capital as paid up otherwise than by the receipt of new consideration,
the amount so paid up shall, except as provided by any provision of the Corporation Tax Acts, be treated as a distribution made in respect of the shares on which it is paid up, except in so far as that amount exceeds the amount or aggregate amount of share capital so repaid less any amounts previously so paid up and treated by virtue of this subsection as distributions.
(2)Subsection (1) above shall not apply where the repaid share capital consists of fully paid preference shares—
(a)if those shares existed as issued and fully paid preference shares on 6th April 1965 and throughout the period from that date until the repayment those shares continued to be fully paid preference shares, or
(b)if those shares were issued after 6th April 1965 as fully paid preference shares wholly for new consideration not derived from ordinary shares and throughout the period from their issue until the repayment those shares continued to be fully paid preference shares.
(3)M12Except in relation to a company within paragraph D of section 704, subsection (1) above shall not apply if the issue of share capital mentioned in paragraph (b) of that subsection—
(a)is of share capital other than redeemable share capital; and
(b)takes place after 5th April 1973 and more than ten years after the repayment of share capital mentioned in paragraph (a) of that subsection.
(4)M13In this section—
“
” means shares other than preference shares;“
” means shares—which do not carry any right to dividends other than dividends at a rate per cent. of the nominal value of the shares which is fixed, and
which carry rights in respect of dividends and capital which are comparable with those general for fixed-dividend shares [F22listed in the Official List of] the Stock Exchange; and
“
” means new consideration other than consideration—consisting of the surrender, transfer or cancellation of ordinary shares of the company or any other company or consisting of the variation of rights in ordinary shares of the company or any other company, or
derived from a repayment of share capital paid in respect of ordinary shares of the company or of any other company.
Textual Amendments
F22Words in s. 210(4) substituted (with effect in accordance with Sch. 38 para. 7(3) of the amending Act) by Finance Act 1996 (c. 8), Sch. 38 para. 7(1)(2)(a)
Marginal Citations
M11Source—1970 s.234(1), (2)
M12Source—1972 Sch.22 5(2), (3)
M13Source—1970 s.234(3); 1973 s.54
(1)M14Where—
(a)a company issues any share capital as paid up otherwise than by the receipt of new consideration, or has done so after 6th April 1965; and
(b)any amount so paid up does not fall to be treated as a qualifying distribution or, where the issue took place before 6th April 1973, did not fall to be treated as a distribution;
then, except as otherwise provided by any provision of the Corporation Tax Acts, for the purposes of sections 209 and 210, distributions afterwards made by the company in respect of shares representing that share capital shall not be treated as repayments of share capital, except to the extent to which those distributions, together with any relevant distributions previously so made, exceed the amounts so paid up (then or previously) on such shares after 6th April 1965 and not falling to be treated as qualifying distributions or, where the share capital was issued before 6th April 1973, as distributions.
(2)M15Except in relation to a company within paragraph D of section 704, subsection (1) above shall not prevent a distribution being treated as a repayment of share capital if it is made—
(a)more than ten years after the issue of share capital mentioned in paragraph (a) of that subsection; and
(b)in respect of share capital other than redeemable share capital.
(3)M16In subsection (1) above “relevant distribution” means so much of any distribution made in respect of shares representing the relevant share capital as apart from that subsection would be treated as a repayment of share capital, but by virtue of that subsection cannot be so treated.
(4)For the purposes of subsection (1) above all shares of the same class shall be treated as representing the same share capital, and where shares are issued in respect of other shares, or are directly or indirectly converted into or exchanged for other shares, all such shares shall be treated as representing the same share capital.
(5)Where share capital is issued at a premium representing new consideration, the amount of the premium is to be treated as forming part of that share capital for the purpose of determining under this Chapter whether any distribution made in respect of shares representing the share capital is to be treated as a repayment of share capital.
(6)Subsection (5) above shall not have effect in relation to any part of the premium after that part has been applied in paying up share capital.
(7)Subject to subsection (5) above, premiums paid on redemption of share capital are not to be treated as repayments of capital.
Marginal Citations
M14Source—1970 s.235(1); 1972 Sch.22 6(1), (3)
M15Source—1972 Sch.22 6(2)
M16Source—1970 s.235 (2)-(5)
M17(1)Any interest or other distribution—
(a)which is paid out of the assets of a company (“the borrower”) to another company which is within the charge to corporation tax; and
(b)which is so paid in respect of securities of the borrower which fall within F23. . . any of sub-paragraphs (i) to (iii) and (vi) [F24and (vii)] of paragraph (e) of section 209(2); and
(c)which does not fall within paragraph (d) of section 209(2),
shall not be a distribution for the purposes of the Corporation Tax Acts unless the application of this subsection is excluded by subsection (2) or (3) below.
(2)Subsection (1) above does not apply in the case of any interest or other distribution which is paid in respect of a security of the borrower falling within section 209(2)(e)(iii) if—
(a)the principal secured does not exceed £100,000; and
(b)the borrower is under an obligation to repay the principal and interest before the expiry of the period of five years beginning on the date on which the principal was paid to the borrower; and
(c)that obligation either was entered into before 9th March 1982 or was entered into before 1st July 1982 pursuant to negotiations which were in progress on 9th March 1982; and
(d)where the period for repayment of either principal or interest is extended after 8th March 1982 (but paragraph (b) above still applies), the interest or other distribution is paid within the period which was applicable immediately before that date;
and for the purposes of paragraph (c) above negotiations shall not be regarded as having been in progress on 9th March 1982 unless, before that date, the borrower had applied to the lender for a loan and had supplied the lender with any documents required by him to support the application.
(3)F25. . . Subsection (1) above does not apply in a case where the company to which the interest or other distribution is paid is entitled under any enactment, other than section 208, to an exemption from tax in respect of that interest or distribution F25. . . .
(4)F26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F23Words in s. 212(1)(b) repealed (with effect in accordance with s. 37 of the repealing Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(2), Note
F24Words in s. 212(1)(b) inserted (16.7.1992 with application where the interest or other distribution is paid after 14.5.1992) by Finance (No. 2) Act 1992 (c. 48), s. 31(3)(4).
F25Words in s. 212(3) repealed (with effect in accordance with s. 37 of the repealing Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(2), Note
F26S. 212(4) repealed (with effect in accordance with s. 37 of the repealing Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(2), Note
Marginal Citations
M17Source—1982 s.60(1)-(4)
M18(1)The provisions of this section and sections 214 to 218 have effect for facilitating certain transactions whereby trading activities carried on by a single company or group are divided so as to be carried on by two or more companies not belonging to the same group or by two or more independent groups.
(2)References in the Corporation Tax Acts to distributions of a company shall not apply to any distribution—
(a)which falls within subsection (3) below, and
(b)in respect of which the conditions specified in subsections (4) to (12) below are satisfied;
and any such distribution is referred to in this section as an “exempt distribution”.
(3)The following distributions fall within this subsection—
(a)a distribution consisting of the transfer to all or any of its members by a company (“the distributing company”) of shares in one or more companies which are its 75 per cent. subsidiaries;
(b)a distribution consisting of the transfer by a company (“the distributing company”) to one or more other companies (“the transferee company or companies”) of—
(i)a trade or trades; or
(ii)shares in one or more companies which are 75 per cent. subsidiaries of the distributing company,
and the issue of shares by the transferee company or companies to all or any of the members of the distributing company;
and in this section and sections 214 to 217 references to a relevant company are to the distributing company, to each subsidiary whose shares are transferred as mentioned in paragraph (a) or (b) (ii) above and to each transferee company mentioned in paragraph (b) above.
(4)Each relevant company must be resident in the United Kingdom at the time of the distribution.
(5)The distributing company must at the time of the distribution be either a trading company or a member of a trading group and each subsidiary whose shares are transferred as mentioned in subsection (3)(a) or (b)(ii) above must at that time be either a trading company or the holding company of a trading group.
(6)In a case within subsection [F27(3)(a)] above—
(a)the shares must not be redeemable, must constitute the whole or substantially the whole of the distributing company’s holding of the ordinary share capital of the subsidiary and must confer the whole or substantially the whole of the distributing company’s voting rights in the subsidiary; and
(b)subject to subsections (7) and (12)(b) below, the distributing company must after the distribution be either a trading company or the holding company of a trading group.
(7)Subsection (6)(b) above does not apply if the transfer relates to two or more 75 per cent. subsidiaries of the distributing company and that company is dissolved without there having been after the distribution any net assets of the company available for distribution in a winding up or otherwise.
(8)In a case within subsection (3)(b) above—
(a)if a trade is transferred the distributing company must either not retain any interest or retain only a minor interest in that trade;
(b)if shares in a subsidiary are transferred those shares must constitute the whole or substantially the whole of the distributing company’s holding of the ordinary share capital of the subsidiary and must confer the whole or substantially the whole of the distributing company’s voting rights in the subsidiary;
(c)the only or main activity of the transferee company or each transferee company after the distribution must be the carrying on of the trade or the holding of the shares transferred to it;
(d)the shares issued by the transferee company or each transferee company must not be redeemable, must constitute the whole or substantially the whole of its issued ordinary share capital and must confer the whole or substantially the whole of the voting rights in that company; and
(e)subject to subsections (9) and (12)(b) below, the distributing company must after the distribution be either a trading company or the holding company of a trading group.
(9)Subsection (8)(e) above does not apply if there are two or more transferee companies each of which has a trade or shares in a separate 75 per cent. subsidiary of the distributing company transferred to it and the distributing company is dissolved without there having been after the distribution any net assets of the company available for distribution in a winding up or otherwise.
(10)The distribution must be made wholly or mainly for the purpose of benefiting some or all of the trading activities which before the distribution are carried on by a single company or group and after the distribution will be carried on by two or more companies or groups.
(11)The distribution must not form part of a scheme or arrangements the main purpose or one of the main purposes of which is—
(a)the avoidance of tax (including [F28stamp duty or stamp duty land tax]); or
(b)without prejudice to paragraph (a) above, the making of a chargeable payment, as defined by section 214, or what would be such a payment if any of the companies mentioned in that section were an unquoted company; or
(c)the acquisition by any person or persons other than members of the distributing company of control of that company, of any other relevant company or of any company which belongs to the same group as any such company; or
(d)the cessation of a trade or its sale after the distribution.
In paragraph (c) above “group” means a company which has one or more 51 per cent. subsidiaries together with that or those subsidiaries.
(12)Where the distributing company is a 75 per cent. subsidiary of another company—
(a)the group (or, if more than one, the largest group) to which the distributing company belongs at the time of the distribution must be a trading group;
(b)subsections (6)(b) and (8)(e) above shall not apply; and
(c)the distribution must be followed by one or more other distributions falling within subsection (3)(a) or (b)(ii) above which satisfy the conditions of this section and result in members of the holding company of the group (or, if more than one, the largest group) to which the distributing company belonged at the time of the distribution becoming members of—
(i)the transferee company or each transferee company to which a trade was transferred by the distributing company; or
(ii)the subsidiary or each subsidiary whose shares were transferred by the distributing company; or
(iii)a company (other than that holding company) of which the company or companies mentioned in sub-paragraph (i) or (ii) above are 75 per cent. subsidiaries.
Textual Amendments
F271990 s.89and Sch.14 para.3 (correction of errors)—deemed always to have had effect. Previously
“(3)(1)(a)”.
F28Words in s. 213(11)(a) substituted (10.7.2003 subject to Sch. 19 to the amending Act) by Finance Act 2003 (c. 14), Sch. 18 para. 3(3)
Marginal Citations
M18Source—1980 s.117, Sch.18 1-8, 23
Valid from 29/11/2007
(1)A reference in the Corporation Tax Acts to distributions of a company shall not apply to a distribution if—
(a)it is a distribution consisting of—
(i)the transfer of part of a business by a company (“the distributing company”) to one or more other companies (“the transferee company or companies”), and
(ii)the issue of shares by the transferee company or companies to the members of the distributing company, and
(b)the requirements of either section 140A(1A) of the 1992 Act (division of UK business) or section 140C(1A) of that Act (division of non-UK business) are satisfied in relation to the distribution.
(2)A distribution to which this section applies is an “exempt distribution” for the purposes of sections 214 to 217.
(3)The expression “relevant company” in sections 214 to 217 includes the distributing company and the transferee company or companies.]
Textual Amendments
F29S. 213A inserted (29.11.2007 with effect in accordance with reg. 3(1) of the amending S.I. (as retrospectively amended by S.I. 2008/1579, reg. 4(1)) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 1 para. 13
(1)M19If within five years after the making of an exempt distribution there is a chargeable payment—
(a)the amount or value of the payment shall be treated as income chargeable to tax under Case VI of Schedule D;
(b)unless the payment is a transfer of money’s worth, sections 349(1) and 350 shall apply to the payment as if it were an annual sum payable otherwise than out of profits or gains charged to income tax;
(c)the payment shall be regarded as a distribution for the purposes of [F30section 337A(1)] ; and
(d)the payment shall not (if it otherwise would) be treated as a repayment of capital for the purposes of section 210 or 211.
(2)M20In this section “a chargeable payment” means any payment made otherwise than for bona fide commercial reasons or forming part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax (including [F31stamp duty or stamp duty land tax]), being a payment which—
(a)a company concerned in an exempt distribution makes directly or indirectly to a member of that company or of any other company concerned in that distribution; and
(b)is made in connection with, or with any transaction affecting, the shares in that or any such company; and
(c)is not a distribution or exempt distribution or made to another company which belongs to the same group as the company making the payment.
(3)Where a company concerned in an exempt distribution is an unquoted company subsection (2)(a) above shall have effect as if any reference to the making of a payment by, or to a member of, a company concerned in the exempt distribution included a reference to the making of a payment by or to any other person in pursuance of a scheme or arrangements made with the unquoted company or, if the unquoted company is—
(a)under the control of five or fewer persons; and
(b)not under the control of (and only of) a company which is not itself under the control of five or fewer persons,
with any of the persons mentioned in paragraph (a) above.
(4)References in this section to a company concerned in an exempt distribution are to any relevant company and to any other company which was connected with any such company for the whole or any part of the period beginning with the exempt distribution and ending with the making of the payment which is in question under this section.
(5)For the purposes of subsection (4) above and this subsection a company shall be deemed to have been connected in the period referred to in that subsection with each company to which a company connected with it was connected in that period.
(6)References in this section to a payment include references to a transfer of money’s worth including the assumption of a liability.
Textual Amendments
F30Words in s. 214(1)(c) substituted (24.7.2002) by Finance Act 2002 (c. 23), Sch. 30 para. 1(3)
F31Words in s. 214(2) substituted (10.7.2003 subject to Sch. 19 to the amending Act) by Finance Act 2003 (c. 14), Sch. 18 para. 3(4)
Marginal Citations
M19Source—1980 Sch.18 14
M20Source—1980 Sch.18 13
(1)M21A distribution shall be treated as an exempt distribution in any case in which, before the distribution is made, the Board have, on the application of the distributing company, notified that company that the Board are satisfied that it will be such a distribution.
(2)A payment shall not be treated as a chargeable payment in any case in which, before the payment is made, the Board have, on the application of the person intending to make it, notified him that they are satisfied that it will be made for bona fide commercial reasons and will not form part of any scheme or arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax (including [F32stamp duty or stamp duty land tax]).
(3)A company which becomes or ceases to be connected with another company may make an application under subsection (2) above as respects any payments that may be made by it at any time after becoming or ceasing to be so connected (whether or not there is any present intention to make any payments); and where a notification is given by the Board on such an application no payment to which the notification relates shall be treated as a chargeable payment by reason only of the company being or having been connected with the other company.
(4)References in subsections (2) and (3) above to a payment shall be construed as in section 214.
(5)M22Any application under this section shall be in writing and shall contain particulars of the relevant transactions and the Board may, within 30 days of the receipt of the application or of any further particulars previously required under this subsection, by notice require the applicant to furnish further particulars for the purposes of enabling the Board to make their decision; and if any such notice is not complied with within 30 days or such longer period as the Board may allow, the Board need not proceed further on the application.
(6)The Board shall notify their decision to the applicant within 30 days of receiving the application or, if they give a notice under subsection (5) above, within 30 days of the notice being complied with.
(7)If the Board notify the applicant that they are not satisfied as mentioned in subsection (1) or (2) above or do not notify their decision to the applicant within the time required by subsection (6) above, the applicant may within 30 days of the notification or of that time require the Board to transmit the application, together with any notice given and further particulars furnished under subsection (5) above, to the Special Commissioners; and in that event any notification by the Special Commissioners shall have effect for the purposes of this section as if it were a notification by the Board.
(8)If any particulars furnished under this section do not fully and accurately disclose all facts and circumstances material for the decision of the Board or the Special Commissioners, any resulting notification that the Board or Commissioners are satisfied as mentioned in subsection (1) or (2) above shall be void.
Textual Amendments
F32Words in s. 215(2) substituted (10.7.2003 subject to Sch. 19 to the amending Act) by Finance Act 2003 (c. 14), Sch. 18 para. 3(5)
Marginal Citations
M21Source—1980 Sch.18 17
M22Source—1980 Sch.18 18
(1)M23Where a company makes an exempt distribution it shall within 30 days after the distribution make a return to the inspector giving particulars of the distribution and of the circumstances by reason of which it is exempt.
(2)M24Where within five years after the making of an exempt distribution a person makes a chargeable payment which consists of a transfer of money’s worth, he shall within 30 days after the transfer make a return to the inspector giving particulars—
(a)of the transaction effecting the transfer;
(b)of the name and address of the recipient or each recipient and the value of what is transferred to him or each of them; and
(c)if the transfer is accompanied by a chargeable payment consisting of a payment of money, of that payment.
(3)Subject to subsection (4) below, where within five years after the making of an exempt distribution a person makes a payment or a transfer of money’s worth which would be a chargeable payment but for the fact that it is made for bona fide commercial reasons and does not form part of any such scheme or arrangements as are mentioned in section 214(2), that person shall within 30 days after making the payment or transfer make a return to the inspector giving particulars—
(a)in the case of a transfer, of the transaction by which it is effected;
(b)of the name and address of the recipient or each recipient and the amount of the payment made, or the value of what is transferred, to him or each of them; and
(c)of the circumstances by reason of which the payment or transfer is not a chargeable payment.
(4)Subsection (3) above does not apply where the payment or transfer is one in relation to which a notification under section 215(3) has effect.
(1)M25Where a distribution falling within section 213(3) has been made and the inspector has reason to believe that it may form part of any such scheme or arrangements as are mentioned in section 213(11), he may by notice require any relevant company or any person controlling any such company to furnish him within such time, not being less than 30 days, as may be specified in the notice with—
(a)a declaration in writing stating whether or not, according to information which the company or that person has or can reasonably obtain, any such scheme or arrangements exist or have existed;
(b)such other information as the inspector may reasonably require for the purposes of section 213(11) and the company or that person has or can reasonably obtain.
(2)M26If the inspector has reason to believe that a person has not delivered an account or made a return which he is required to deliver or make by virtue of section 214(1)(b) or 216(2) or (3) in respect of any payment or transfer, he may by notice require that person to furnish him within such time, not being less than 30 days, as may be specified in the notice with such information relating to the payment or transfer as he may reasonably require for the purposes of section 214.
(3)If the inspector has reason to believe that a payment or transfer has been made within five years after the making of an exempt distribution and that the payment or transfer is a chargeable payment by reason of the existence of any such scheme or arrangements as are mentioned in section 214(3), he may by notice require the person making the payment or transfer or, if that person is a company, any person controlling it to furnish him within such time, not being less than 30 days, as may be specified in the notice with—
(a)a declaration in writing stating whether or not, according to information which that person has, or can reasonably obtain, any such scheme or arrangements exist or have existed;
(b)such other information as the inspector may reasonably require for the purposes of section 214 and that person has or can reasonably obtain.
(4)Any recipient of a chargeable payment and any person on whose behalf such a payment is received shall, if so required by the inspector, state whether the payment received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.
M27(1)In sections 213 to 217—
“chargeable payment” has the meaning given by section 214(2);
“control” shall be construed in accordance with section 416(2) to (6);
“distributing company” has the meaning given by section 213(3);
“exempt distribution” has the meaning given by section 213(2);
“group”, except in section 213(11)(c), means a company which has one or more 75 per cent. subsidiaries together with that or those subsidiaries;
“holding company” means a company whose business (disregarding any trade carried on by it) consists wholly or mainly of the holding of shares or securities of one or more companies which are its 75 per cent. subsidiaries;
“member”, where the reference is to a member of a company, does not, except in section 214(2)(a), include a person who is a member otherwise than by virtue of holding shares forming part of the company’s ordinary share capital;
“relevant company” has the meaning given by section 213(3);
“
” includes stock;“trade”, except in subsection (3) below, does not include dealing in shares, securities, land, trades or commodity futures and “trading activities” shall be construed accordingly;
“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades;
“trading group” means a group the business of whose members, taken together, consists wholly or mainly in the carrying on of a trade or trades; and
“unquoted company” means a company which does not satisfy the condition that its shares or some class thereof (disregarding debenture or loan stock, preferred shares or preferred stock) are listed in the Official List of the Stock Exchange and are dealt in on the Stock Exchange regularly or from time to time, so however that this definition does not apply to a company under the control of (and only of) one or more companies to which this definition does not apply.
(2)In determining for the purposes of section 213(3) to (9) whether a company whose shares are transferred by the distributing company is a 75 per cent. subsidiary of the distributing company there shall be disregarded any share capital of the first-mentioned company which is owned indirectly by the distributing company.
(3)In determining for the purposes of sections 213 to 217 whether one company is a 75 per cent. subsidiary of another, the other company shall be treated as not being the owner of—
(a)any share capital which it owns directly in a body corporate if a profit on a sale of the shares would be treated as a trading receipt of its trade; or
(b)any share capital which it owns indirectly and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.
(4)Section 839 applies for the purposes of sections 213 to 217.
Marginal Citations
M27Source—1980 Sch.18 23
M28(1)References in the Corporation Tax Acts to distributions of a company shall not include references to a payment made by a company on the redemption, repayment or purchase of its own shares if the company is an unquoted trading company or the unquoted holding company of a trading group and either—
(a)the redemption, repayment or purchase is made wholly or mainly for the purpose of benefiting a trade carried on by the company or by any of its 75 per cent. subsidiaries, and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is—
(i)to enable the owner of the shares to participate in the profits of the company without receiving a dividend, or
(ii)the avoidance of tax; and
the conditions specified in sections 220 to 224, so far as applicable, are satisfied in relation to the owner of the shares; or
(b)the whole or substantially the whole of the payment (apart from any sum applied in paying capital gains tax charged on the redemption, repayment or purchase) is applied by the person to whom it is made in discharging a liability of his for inheritance tax charged on a death and is so applied within the period of two years after the death;
and in sections 220 to 224—
“the purchase” means the redemption, repayment or purchase referred to in subsection (1)(a) above; and
“the vendor” means the owner of the shares at the time it is made.
(2)Where, apart from this subsection, a payment falls within subsection (1)(b) above, subsection (1) above shall not apply to the extent that the liability in question could without undue hardship have been discharged otherwise than through the redemption, repayment or purchase of shares in the company or another unquoted company which is a trading company or the holding company of a trading group.
Marginal Citations
M28Source—1982 s.53(1)-(3); 1986 s.100
M29(1)The vendor must be resident and ordinarily resident in the United Kingdom in the year of assessment in which the purchase is made and if the shares are held through a nominee the nominee must also be so resident and ordinarily resident.
(2)The residence and ordinary residence of trustees shall be determined for the purposes of this section as they are determined under section [F3369 of the 1992 Act] for the purposes of that Act.
(3)The residence and ordinary residence of personal representatives shall be taken for the purposes of this section to be the same as the residence and ordinary residence of the deceased immediately before his death.
(4)The references in this section to a person’s ordinary residence shall be disregarded in the case of a company.
(5)The shares must have been owned by the vendor throughout the period of five years ending with the date of the purchase.
(6)If at any time during that period the shares were transferred to the vendor by a person who was then his spouse living with him then, unless that person is alive at the date of the purchase but is no longer the vendor’s spouse living with him, any period during which the shares were owned by that person shall be treated for the purposes of subsection (5) above as a period of ownership by the vendor.
(7)Where the vendor became entitled to the shares under the will or on the intestacy of a previous owner or is the personal representative of a previous owner—
(a)any period during which the shares were owned by the previous owner or his personal representatives shall be treated for the purposes of subsection (5) above as a period of ownership by the vendor, and
(b)that subsection shall have effect as if it referred to three years instead of five.
(8)In determining whether the condition in subsection (5) above is satisfied in a case where the vendor acquired shares of the same class at different times—
(a)shares acquired earlier shall be taken into account before shares acquired later, and
(b)any previous disposal by him of shares of that class shall be assumed to be a disposal of shares acquired later rather than of shares acquired earlier.
(9)If for the purposes of capital gains tax the time when shares were acquired would be determined under any provision of Chapter II of Part IV of the [F331992] Act (reorganisation of share capital, conversion of securities, etc.) then, unless the shares were allotted for payment or were comprised in share capital to which section 249 applies, it shall be determined in the same way for the purposes of this section.
Textual Amendments
F33Words in s. 220(2)(9) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 14(14) (with ss. 60, 101(1), 171, 201(3)).
Marginal Citations
M29Source—1982 Sch.9 1, 2
(1)M30If immediately after the purchase the vendor owns shares in the company, then, subject to section 224, the vendor’s interest as a shareholder must be substantially reduced.
(2)M31If immediately after the purchase any associate of the vendor owns shares in the company then, subject to section 224, the combined interests as shareholders of the vendor and his associates must be substantially reduced.
(3)The question whether the combined interests as shareholders of the vendor and his associates are substantially reduced shall be determined in the same way as is (under the following subsections) the question whether a vendor’s interest as a shareholder is substantially reduced, except that the vendor shall be assumed to have the interests of his associates as well as his own.
(4)M32Subject to subsection (5) below, the vendor’s interest as a shareholder shall be taken to be substantially reduced if and only if the total nominal value of the shares owned by him immediately after the purchase, expressed as a fraction of the issued share capital of the company at that time, does not exceed 75 per cent. of the corresponding fraction immediately before the purchase.
(5)The vendor’s interest as a shareholder shall not be taken to be substantially reduced where—
(a)he would, if the company distributed all its profits available for distribution immediately after the purchase, be entitled to a share of those profits, and
(b)that share, expressed as a fraction of the total of those profits, exceeds 75 per cent. of the corresponding fraction immediately before the purchase.
(6)In determining for the purposes of subsection (5) above the division of profits among the persons entitled to them, a person entitled to periodic distributions calculated by reference to fixed rates or amounts shall be regarded as entitled to a distribution of the amount or maximum amount to which he would be entitled for a year.
(7)M33In subsection (5) above “profits available for distribution” has the same meaning as it has for the purposes of Part VIII of the M34Companies Act 1985, except that for the purposes of that subsection the amount of the profits available for distribution (whether immediately before or immediately after the purchase) shall be treated as increased—
(a)in the case of every company, by £100, and
(b)in the case of a company from which any person is entitled to periodic distributions of the kind mentioned in subsection (6) above, by a further amount equal to that required to make the distribution to which he is entitled in accordance with that subsection;
and where the aggregate of the sums payable by the company on the purchase and on any contemporaneous redemption, repayment or purchase of other shares of the company exceeds the amount of the profits available for distribution immediately before the purchase, that amount shall be treated as further increased by an amount equal to the excess.
(8)M35References in this section to entitlement are, except in the case of trustees and personal representatives, references to beneficial entitlement.
Marginal Citations
M30Source—1982 Sch.9 3(1)
M31Source—1982 Sch.9 4
M32Source—1982 Sch.9 3(2)-(4)
M33Source—1982 Sch.9 3(5), (6)
M35Source—1982 Sch.9 3(7)
(1)M36Subject to section 224, where the company making the purchase is immediately before the purchase a member of a group and—
(a)immediately after the purchase the vendor owns shares in one or more other members of the group (whether or not he then owns shares in the company making the purchase), or
(b)immediately after the purchase the vendor owns shares in the company making the purchase and immediately before the purchase he owned shares in one or more other members of the group,
the vendor’s interest as a shareholder in the group must be substantially reduced.
(2)In subsections (5) to (7) below “relevant company” means the company making the purchase and any other member of the group in which the vendor owns shares immediately before or immediately after the purchase, but subject to subsection (4) below.
(3)M37Subject to section 224, where the company making the purchase is immediately before the purchase a member of a group and at that time an associate of the vendor owns shares in any member of the group, the combined interests as shareholders in the group of the vendor and his associates must be substantially reduced.
(4)M38The question whether the combined interests as shareholders in the group of the vendor and his associates are substantially reduced shall be determined in the same way as is (under the following subsections) the question whether a vendor’s interest as a shareholder in a group is substantially reduced, except that the vendor shall be assumed to have the interests of his associates as well as his own (and references in subsections (5) to (7) below to a relevant company shall be construed accordingly).
(5)M39The vendor’s interest as a shareholder in the group shall be ascertained by—
(a)expressing the total nominal value of the shares owned by him in each relevant company as a fraction of the issued share capital of the company,
(b)adding together the fractions so obtained, and
(c)dividing the result by the number of relevant companies (including any in which he owns no shares).
(6)Subject to subsection (7) below, the vendor’s interest as a shareholder in the group shall be taken to be substantially reduced if and only if it does not exceed 75 per cent. of the corresponding interest immediately before the purchase.
(7)The vendor’s interest as a shareholder in the group shall not be taken to be substantially reduced if—
(a)he would, if every member of the group distributed all its profits available for distribution immediately after the purchase (including any profits received by it on a distribution by another member), be entitled to a share of the profits of one or more of them, and
(b)that share, or the aggregate of those shares, expressed as a fraction of the aggregate of the profits available for distribution of every member of the group which is—
(i)a relevant company, or
(ii)a 51 per cent. subsidiary of a relevant company,
exceeds 75 per cent. of the corresponding fraction immediately before the purchase.
(8)Subsections (6) and (7) of section 221 shall apply for the purposes of subsection (7) above as they apply for the purposes of subsection (5) of that section.
(9)M40Subject to the following subsections, in this section “group” means a company which has one or more 51 per cent. subsidiaries, but is not itself a 51 per cent. subsidiary of any other company, together with those subsidiaries.
(10)M41Where the whole or a significant part of the business carried on by an unquoted company (“the successor company”) was previously carried on by—
(a)the company making the purchase, or
(b)a company which is (apart from this subsection) a member of a group to which the company making the purchase belongs, the successor company and any company of which it is a 51 per cent. subsidiary shall be treated as being a member of the same group as the company making the purchase (whether or not, apart from this subsection, the company making the purchase is a member of a group).
(11)Subsection (10) above shall not apply if the successor company first carried on the business there referred to more than three years before the time of the purchase.
(12)For the purposes of this section a company which has ceased to be a 51 per cent. subsidiary of another company before the time of the purchase shall be treated as continuing to be such a subsidiary if at that time there exist arrangements under which it could again become such a subsidiary.
Marginal Citations
M36Source—1982 Sch.9 5(1), (2)
M37Source—1982 Sch.9 6(1), (2)
M38Source—1982 Sch.9 6(3)
M39Source—1982 Sch.9 5(3)-(6)
M40Source—1982 Sch.9 5(7), 6(4)
M41Source—1982 Sch.9 5(8)-(10)
(1)M42Subject to section 224, the vendor must not immediately after the purchase be connected with the company making the purchase or with any company which is a member of the same group as that company.
In this subsection “group” has the same meaning as it has for the purposes of section 222.
(2)M43Subject to section 224, the purchase must not be part of a scheme or arrangement which is designed or likely to result in the vendor or any associate of his having interests in any company such that, if he had those interests immediately after the purchase, any of the conditions in sections 221 and 222 and subsection (1) above could not be satisfied.
(3)A transaction occurring within one year after the purchase shall be deemed for the purposes of subsection (2) above to be part of a scheme or arrangement of which the purchase is also part.
M44Where—
(a)any of the conditions in sections 221 to 223 which are applicable are not satisfied in relation to the vendor, but
(b)he proposed or agreed to the purchase in order that the condition in section 221(2) or 222(3) could be satisfied in respect of the redemption, repayment or purchase of shares owned by a person of whom he is an associate,
then, to the extent that that result is produced by virtue of the purchase, section 219(1)(a) shall have effect as if the conditions in sections 221 to 223 were satisfied in relation to the vendor.
Marginal Citations
M44Source—1982 Sch.9 9
(1)M45A payment made by a company on the redemption, repayment or purchase of its own shares shall be deemed—
(a)to be one to which section 219 applies if, before it is made, the Board have on the application of the company notified the company that they are satisfied that the section will apply; and
(b)to be one to which section 219 does not apply if, before it is made, the Board have on the application of the company notified the company that they are satisfied that the section will not apply.
(2)An application under this section shall be in writing and shall contain particulars of the relevant transactions; and the Board may, within 30 days of the receipt of the application or of any further particulars previously required under this subsection, by notice require the applicant to furnish further particulars for the purpose of enabling the Board to make their decision.
(3)If a notice under subsection (2) above is not complied with within 30 days or such longer period as the Board may allow, the Board need not proceed further on the application.
(4)The Board shall notify their decision to the applicant within 30 days of receiving the application or, if they give a notice under subsection (2) above, within 30 days of the notice being complied with.
(5)If particulars furnished under this section do not fully and accurately disclose all facts and circumstances material for the decision of the Board, any resulting notification by the Board shall be void.
Marginal Citations
M45Source—1982 Sch.9 10
(1)M46A company which treats a payment made by it as one to which section 219 applies shall within 60 days after making the payment make a return to the inspector giving particulars of the payment and of the circumstances by reason of which that section is regarded as applying to it.
(2)Where a company treats a payment made by it as one to which section 219(1)(a) applies, any person connected with the company who knows of any such scheme or arrangement affecting the payment as is mentioned in section 223(2) shall, within 60 days after he first knows of both the payment and the scheme or arrangement, give a notice to the inspector containing particulars of the scheme or arrangement.
(3)M47Where the inspector has reason to believe that a payment treated by the company making it as one to which section 219(1)(a) applies may form part of a scheme or arrangement of the kind referred to therein or in section 223(2), he may by notice require the company or any person who is connected with the company to furnish him within such time, not being less than 60 days, as may be specified in the notice with—
(a)a declaration in writing stating whether or not, according to information which the company or that person has or can reasonably obtain, any such scheme or arrangement exists or has existed, and
(b)such other information as the inspector may reasonably require for the purposes of the provision in question and the company or that person has or can reasonably obtain.
(4)The recipient of a payment treated by the company making it as one to which section 219 applies, and any person on whose behalf such a payment is received, shall if so required by the inspector state whether the payment received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.
M48(1)Any question whether a person is an associate of another in relation to a company shall be determined for the purposes of sections 219 to 226 and 228 in accordance with the following provisions of this section.
(2)A husband and wife living together are associates of one another, a person under the age of 18 is an associate of his parents, and his parents are his associates.
(3)A person connected with a company is an associate of the company and of any company controlled by it, and the company and any company controlled by it are his associates.
(4)Where a person connected with one company has control of another company, the second company is an associate of the first.
(5)Where shares in a company are held by trustees (other than bare trustees) then in relation to that company, but subject to subsection (8) below, the trustees are associates of—
(a)any person who directly or indirectly provided property to the trustees or has made a reciprocal arrangement for another to do so,
(b)any person who is, by virtue of subsection (2) above, an associate of a person within paragraph (a) above, and
(c)any person who is or may become beneficially entitled to a significant interest in the shares;
and any such person is an associate of the trustees.
(6)Where shares in a company are comprised in the estate of a deceased person, then in relation to that company the deceased’s personal representatives are associates of any person who is or may become beneficially entitled to a significant interest in the shares, and any such person is an associate of the personal representatives.
(7)Where one person is accustomed to act on the directions of another in relation to the affairs of a company, then in relation to that company the two persons are associates of one another.
(8)Subsection (5) above shall not apply to shares held on trusts which—
(a)relate exclusively to an exempt approved scheme as defined in Chapter I of Part XIV, or
(b)are exclusively for the benefit of the employees, or the employees and directors, of the company referred to in that subsection or of companies in a group to which that company belongs, or their dependants (and are not wholly or mainly for the benefit of directors or their relatives);
and for the purposes of this subsection “group” means a company which has one or more 51 per cent. subsidiaries, together with those subsidiaries.
(9)For the purposes of subsections (5) and (6) above a person’s interest is significant if its value exceeds 5 per cent. of the value of all the property held on the trusts or, as the case may be, comprised in the estate concerned, excluding any property in which he is not and cannot become beneficially entitled to an interest.
Marginal Citations
M48Source—1982 Sch.9 14
M49(1)Any question whether a person is connected with a company shall be determined for the purposes of sections 219 to 227 in accordance with the following provisions of this section.
(2)A person is connected with a company if he directly or indirectly possesses or is entitled to acquire more than 30 per cent. of—
(a)the issued ordinary share capital of the company, or
(b)the loan capital and issued share capital of the company, or
(c)the voting power in the company.
(3)Where a person—
(a)acquired or became entitled to acquire loan capital of a company in the ordinary course of a business carried on by him, being a business which includes the lending of money, and
(b)takes no part in the management or conduct of the company,
his interest in that loan capital shall be disregarded for the purposes of subsection (2) above.
(4)A person is connected with a company if he directly or indirectly possesses or is entitled to acquire such rights as would, in the event of the winding up of the company or in any other circumstances, entitle him to receive more than 30 per cent. of the assets of the company which would then be available for distribution to equity holders of the company; and for the purposes of this subsection—
(a)the persons who are equity holders of the company, and
(b)the percentage of the assets of the company to which a person would be entitled,
shall be determined in accordance with paragraphs 1 and 3 of Schedule 18, taking references in paragraph 3 to the first company as references to an equity holder and references to a winding up as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.
(5)A person is connected with a company if he has control of it.
(6)References in this section to the loan capital of a company are references to any debt incurred by the company—
(a)for any money borrowed or capital assets acquired by the company, or
(b)for any right to receive income created in favour of the company, or
(c)for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon).
(7)For the purposes of this section a person shall be treated as entitled to acquire anything which he is entitled to acquire at a future date or will at a future date be entitled to acquire.
(8)For the purposes of this section a person shall be assumed to have the rights or powers of his associates as well as his own.
Marginal Citations
M49Source—1982 Sch.9 15
M50(1)In sections 219 to 228—
“control” has the meaning given by section 840;
“holding company” means a company whose business (disregarding any trade carried on by it) consists wholly or mainly of the holding of shares or securities of one or more companies which are its 75 per cent. subsidiaries;
“personal representatives” means persons responsible for administering the estate of a deceased person;
“quoted company” means a company whose shares (or any class of whose shares) are listed in the official list of a stock exchange;
“
” includes stock;“trade” does not include dealing in shares, securities, land or futures and “trading activities” shall be construed accordingly;
“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades;
“trading group” means a group the business of whose members, taken together, consists wholly or mainly of the carrying on of a trade or trades, and for this purpose “group” means a company which has one or more 75 per cent. subsidiaries together with those subsidiaries; and
“unquoted company” means a company which is neither a quoted company nor a 51 per cent. subsidiary of a quoted company.
(2)References in sections 219 to 228 to the owner of shares are references to the beneficial owner except where the shares are held on trusts (other than bare trusts) or are comprised in the estate of a deceased person, and in such a case are references to the trustees or, as the case may be, to the deceased’s personal representatives.
(3)References in sections 219 to 228 to a payment made by a company include references to anything else that is, or would but for section 219 be, a distribution.
Marginal Citations
M50Source—1982 Sch.9 16
M51Any share capital to which section 249 applies and which is issued by a companyeitherF34 as mentioned in subsection (4), (5) or (6) of that sectionor to a close company as mentioned in paragraph 12(1)of Schedule 19 F34 (readin either caseF34 with subsection (3) of that section)—
(a)shall, notwithstanding section 209(2)(c), not constitute a distribution within the meaning of section 209(2); and
(b)for purposes of sections 210 and 211 shall not be treated as issued “as paid up otherwise than by the receipt of new consideration”.
Textual Amendments
F34Words in s. 230 repealed (in relation to accounting periods beginning after 31.3.1989) by Finance Act 1989 (c. 26), s. 187, Sch. 17 Part V
Marginal Citations
M51Source—1975 (No.2) Sch.8 6
Valid from 01/04/2009
Textual Amendments
F35S. 230A and preceding cross-heading inserted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 100 (with Sch. 2 Pts. 1, 2)
(1)This section applies if—
(a)a dividend or bonus is granted by a registered industrial and provident society, and
(b)section 132 (deduction for dividends etc granted by industrial and provident societies) of CTA 2009 allows the sum representing the dividend or bonus to be deducted in calculating the profits of a trade.
(2)The dividend, or the bonus, is not treated as a distribution for the purposes of the Corporation Tax Acts.]
M52(1)Subject to sections [F36231AA, ][F37231AB,] 95(1)(b) [F38F39. . . and [F40469(2A)]], [F41section 171(2B) of the Finance Act 1993 and section 219(4B) of the Finance Act 1994,] where [F42, in any year of assessment for which income tax is charged,] a company resident in the United Kingdom makes a qualifying distribution and the person receiving the distribution is another such company or a person resident in the United Kingdom, not being a company, the recipient of the distribution shall be entitled to a tax credit equal to such proportion of the amount or value of the distribution as corresponds to [F43the tax credit fraction in force when] the distribution is made.
[F44(1A)The tax credit fraction is one-ninth.]
(2)F45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)[F46Subject to subsection (3AA) below,] a person, not being a company resident in the United Kingdom, who is entitled to a tax credit in respect of a distribution may claim to have the credit set against the income tax chargeable on his income under section 3 or on his total income for the year of assessment in which the distribution is made F47. . . .
[F48(3AA)For any year of assessment, the aggregate amount of the tax credits in respect of which claims are made under subsection (3) above by any person must not exceed the aggregate amount of the tax credits in respect of such qualifying distributions (if any) as are brought into charge to tax in the case of that person.]
(3A)F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3B)F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3C)F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3D)F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)Where a distribution mentioned in subsection (1) above is, or falls to be treated as, or under any provision of the Tax Acts is deemed to be, the income of a person other than the recipient, that person shall be treated for the purposes of this section as receiving the distribution (and accordingly the question whether he is entitled to a tax credit in respect of it shall be determined by reference to where he, and not the actual recipient, is resident);and where any such distribution is income of a United Kingdom trust the trustees shall be entitled to a tax credit in respect of it if no other person falls to be treated for the purposes of this section as receiving the distributionF50.
(5)In subsection (4)above “United Kingdom trust” means a trust administered under the law of any part of the United Kingdom, not being a trust the general administration of which is ordinarily carried on outside the United Kingdom and the trustees, or a majority of the trustees, of which are resident or ordinarily resident outside the United KingdomF50.
Textual Amendments
F36Words in s. 231(1) inserted (with effect in accordance with s. 102(9) of the amending Act) by Finance Act 1998 (c. 36), s. 102(1)
F37Words in s. 231(1) inserted (with effect in accordance with s. 102(10) of the amending Act) by Finance Act 1998 (c. 36), s. 102(2)
F381990 s.42and Sch.7 para.2for accounting periods beginning on or after 1January 1990 (See para.10).
F39Words in s. 231(1) repealed (with effect in accordance with Sch. 33 Pt. 2(10) Note of the repealing Act) by Finance Act 2001 (c. 9), Sch. 33 Pt. 2(10)
F40Words in s. 231(1) substituted (with effect in accordance with Sch. 4 para 4(2) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para 4(1)
F41Words in s. 231(1) inserted (with effect in accordance with s. 22(7) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 22(6)
F42Words in s. 231(1) inserted (with effect in accordance with s. 30(11 of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 30(2)(a)
F43Words in s. 231(1) substituted (with effect in accordance with s. 30(11) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 30(2)(b)
F44S. 231(1A) inserted (with effect in accordance with s. 30(11) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 30(3)
F45S. 231(2) repealed (with effect in accordance with s. 30(11), Sch. 8 Pt. 2(9) Note 3 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 30(4), Sch. 8 Pt. 2(9) (with savings in 1998 c. 36, s. 90(1) and S.I. 1998/1871, reg. 4(1))
F46Words in s. 231(3) substituted (with effect in accordance with s. 30(11) of the amending Act) by Finance (No. 2) Act 1997 (c.58), s. 30(5)(a)
F47Words in s. 231(3) repealed (with effect in accordance with s. 30(11), Sch. 8 Pt. 2(9) Note 3 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 30(5)(b), Sch. 8 Pt. 2(9)
F48S. 231(3AA) inserted (with effect in accordance with s. 30(11) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 30(6)
F49S. 231(3A)-(3D) repealed (with effect in accordance with s. 30(11), Sch. 8 Pt. 2(9) Note 3 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 30(7), Sch. 8 Pt. 2(9)
F50 Repealed by 1989 s.187and Sch.17 Part IVbut in accordance with 1989 ss.110and 111.
Modifications etc. (not altering text)
C16 See 1989 s.107and Sch.12—close companies.
C17S. 231 excluded (27.7.1999) by Commonwealth Development Corporation Act 1999 (c. 20), Sch. 3 paras. 1, 6(2)(b)
C18 See—s.94—taxation of dealer's receipts on purchase by company of own shares.s.423et seq—close company income.s.448—overseas life assurance companies.
C19S. 231(1) excluded by Finance Act 1993 (c. 34), s. 171(2B) (as inserted (with effect in accordance with s. 22(7) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 22(1))
C20S. 231(1) excluded by Finance Act 1993 (c. 34), s. 171(4B) (as inserted (with effect in accordance with s. 22(7) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 22(4))
C21 See—s.812—certain non resident companies connected with unitary states.s.824—repayment supplement.
C22S. 231(4) applied (31.7.1998) by Finance Act 1998 (c. 36), s. 76(4)
Marginal Citations
M52Source—1972 s.86; 1972 s.110(1)
F52. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]
Textual Amendments
F51S. 231A inserted (with effect in accordance with s. 19(3) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 19(2)
F52S. 231A repealed (with effect in accordance with s. 30(11), Sch. 8 Pt. 2(9) Note 3 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 30(8), Sch. 8 Pt. 2(9)
(1)A person shall not be entitled to a tax credit under section 231 in respect of a qualifying distribution if—
(a)he is the borrower under a stock lending arrangement or the interim holder under a repurchase agreement;
(b)the qualifying distribution is, or is a payment representative of, a distribution in respect of securities to which the arrangement or agreement relates; and
(c)a manufactured dividend representative of that distribution is paid by that person in respect of securities to which the arrangement or agreement relates.
[F54(1A)Where subsection (1) above applies to a relevant person in respect of a qualifying distribution, section 233 (1) (certain persons to be treated as having paid income tax at Schedule F ordinary rate on certain distributions etc) shall not apply in relation to that person in respect of that distribution.
In this subsection “relevant person” means a person resident in the United Kingdom, not being a company.]
(2)In this section “stock lending arrangement” has the same meaning as in section 263B of the 1992 Act and, in relation to any such arrangement, any reference to the borrower, or the securities to which the arrangement relates, shall be construed accordingly.
(3)For the purposes of this section the cases where there is a repurchase agreement are the following—
(a)any case falling within subsection (1) of section 730A; and
(b)any case which would fall within that subsection if the sale price and the repurchase price were different;
and, in any such case, any reference to the interim holder, or the securities to which the agreement relates, shall be construed accordingly.
(4)For the purposes of this section “manufactured dividend” has the same meaning as in paragraph 2 of Schedule 23A (and any reference to a manufactured dividend being paid accordingly includes a reference to a payment falling by virtue of section 736B(2) or 737A(5) to be treated for the purposes of Schedule 23A as if it were made).]
Textual Amendments
F53S. 231AA inserted (with effect in accordance with s. 102(9) of the amending Act) by Finance Act 1998 (c. 36), s. 102(1)
F54S. 231AA(1A) inserted (with effect in accordance with Sch. 24 para. 1(4)(5) of the amending Act) by Finance Act 2004 (c. 12), Sch. 24 para. 1(1)
(1)A person shall not be entitled to a tax credit under section 231 in respect of a qualifying distribution if—
(a)he is the original owner under a repurchase agreement;
(b)the qualifying distribution is a manufactured dividend paid to that person by the interim holder under the repurchase agreement in respect of securities to which the agreement relates; and
(c)the repurchase agreement is not such that the actual dividend which the manufactured dividend represents is receivable otherwise than by the original owner.
[F56(1A)Where subsection (1) above applies to a relevant person in respect of a qualifying distribution, section 233 (1) (certain persons to be treated as having paid income tax at Schedule F ordinary rate on certain distributions etc) shall not apply in relation to that person in respect of that distribution.
In this subsection “relevant person” means a person resident in the United Kingdom, not being a company.]
(2)For the purposes of this section the cases where there is a repurchase agreement are the following—
(a)any case falling within subsection (1) of section 730A; and
(b)any case which would fall within that subsection if the sale price and the repurchase price were different;
and, in any such case, any reference to the original owner, the interim holder, or the securities to which the agreement relates, shall be construed accordingly.
(3)Subsection (4) of section 231AA applies for the purposes of this section as it applies for the purposes of that section.]
Textual Amendments
F55S. 231AB inserted (with effect in accordance with s. 102(10) of the amending Act) by Finance Act 1998 (c. 36), s. 102(2)
F56S. 231AB(1A) inserted (with effect in accordance with Sch. 24 para. 1(6) of the amending Act) by Finance Act 2004 (c. 12), Sch. 24 para. 1(2)
(1)This section applies in any case where—
(a)a person (“A”) is entitled to a tax credit in respect of a qualifying distribution;
(b)arrangements subsist such that another person (“B”) obtains, whether directly or indirectly, a payment representing any of the value of the tax credit;
(c)the arrangements (whether or not made directly between A and B) were entered into for an unallowable purpose; and
(d)the condition in subsection (2) below is satisfied.
(2)The condition is that if B had been the person entitled to the tax credit and the qualifying distribution to which it relates, and had received the distribution when it was made, then—
(a)B would not have been entitled to obtain any payment under section 231(2) or (3) in respect of the tax credit; and
(b)if B is a company, B could not have used the income consisting of the distribution to frank a distribution actually made in the accounting period in which it would have received the distribution to which the tax credit relates.
(3)This section does not apply if and to the extent that any other provision of the Tax Acts has the effect of cancelling or reducing the tax advantage which would otherwise be obtained by virtue of the arrangements.
(4)Where this section applies—
(a)no claim shall be made under section 231(2) for payment of the amount of the tax credit;
(b)no claim shall be made under section 231(3) F58. . . in respect of the tax credit;
(c)the income consisting of the distribution in respect of which A is entitled to the tax credit shall not be regarded for the purposes of section 241 as franked investment income; and
(d)no claim shall be made under section 35 of the Finance (No. 2) Act 1997 (transitional relief) for payment of an amount determined by reference to that distribution.
(5)For the purposes of this section, the question whether any arrangements were entered into for an “unallowable purpose” shall be determined in accordance with subsections (6) and (7) below.
(6)Arrangements are entered into for an unallowable purpose if the purposes for which at least one person is a party to the arrangements include a purpose which is not amongst the business or other commercial purposes of that person.
(7)Where one of the purposes for which a person enters into any arrangements is the purpose of securing that that person or another obtains a tax advantage, that purpose shall be regarded as a business or other commercial purpose of the person only if it is neither the main purpose, nor one of the main purposes, for which the person enters into the arrangements.
(8)Any reference in this section to a person obtaining a tax advantage includes a reference to a person obtaining a payment representing any of the value of a tax credit in circumstances where, had the person obtaining the payment been entitled to the tax credit and the qualifying distribution to which it relates, that person—
(a)would not have been entitled to obtain any payment under section 231(2) or (3) in respect of the tax credit; and
(b)if that person is a company, could not have used the income consisting of the distribution to frank a distribution actually made in the accounting period in which it would have received the distribution to which the tax credit relates.
(9)If an amount representing any of the value of a tax credit to which a person is entitled is applied at the direction of, or otherwise in favour of, some other person (whether by way of set off or otherwise), the case shall be treated for the purposes of this section as one where that other person obtains a payment representing any of the value of the tax credit.
(10)In determining for the purposes of subsections (2)(b) and (8)(b) b above whether a company could have used the income consisting of the distribution in question to frank a distribution of the company, the company shall be taken to use its actual franked investment income to frank distributions before using the income consisting of the distribution in question.
(11)References in this section to using franked investment income to frank a distribution of a company have the same meaning as in Chapter V of Part VI.
(12)In this section—
“arrangements” means arrangements of any kind, whether in writing or not (and includes a series of arrangements, whether or not between the same parties);
“business or other commercial purposes” includes the efficient management of investments;
“franked investment income” has the same meaning as in Chapter V of Part VI and references to income consisting of a distribution shall be construed accordingly;
“tax advantage” has the same meaning as in Chapter I of Part XVII.]
Textual Amendments
F57S. 231B inserted (with effect in accordance with s. 28(2) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 28(1)
F58Words in s. 231B(4)(b) repealed (with effect in accordance with Sch. 4 para. 26(2), Sch. 8 Pt. 2(10) Note of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para 26(1), Sch. 8 Pt. 2(10)
M53(1)An individual who, having made a claim in that behalf, is entitled to relief under Chapter I of Part VII by virtue of section 278(2) in respect of any year of assessment shall be entitled to a tax credit in respect of any qualifying distribution received by him in that year to the same extent as if he were resident in the United Kingdom.
(2)F59. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)F59. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F59S. 232(2)(3) repealed (with effect in accordance with Sch. 4 para. 5(2), Sch. 8 Pt. 2(9) Note 3 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 5(1), Sch. 8 Pt. 2(9)
Marginal Citations
M53Source—1972 s.98(1), (3), (4)
M54(1)Where in any year of assessment the income of any person, not being a company resident in the United Kingdom, includes a distribution in respect of which that person is not entitled to a tax credit—
[F60(a)that person shall be treated as having paid income tax at the [F61Schedule F ordinary rate] on the amount or value of the distribution;
(b)no repayment shall be made of any income tax treated by virtue of paragraph (a) above as having been paid;]
(c)the amount or value of the distribution shall be treated F62. . . for the purposes of sections 348 and 349(1) as not brought into charge to income tax.
[F63But this subsection is subject to—
section 231AA(1A) (section 233 (1) not to apply to borrower under stock lending arrangement or interim holder under repurchase agreement);
section 231AB(1A) (section 233 (1) not to apply to original owner under repurchase agreement in respect of certain manufactured dividends).]
[F64(1A)Where in any year of assessment the income of any person who is not a company includes a qualifying distribution in respect of which that person, not being resident in the United Kingdom, is not entitled to a tax credit—
(a)the amount or value of the distribution so far as it is comprised in—
[F65(i)income on which that person falls to be treated as having paid income tax at the [F61Schedule F ordinary rate] by virtue of paragraph (a) of subsection (1) above, or]
[F66(ii)income to which section 686 applies,]
shall be deemed for the purposes of [F67that subsection] or, as the case may be, that section to be the sum which if reduced by an amount equal to income tax on that sum at the [F61Schedule F ordinary rate] would be equal to the amount or value of the distribution actually made; and
(b)that person shall be treated for the purposes of section 686 as having paid tax at the [F61Schedule F ordinary rate] on any amount which under paragraph (a) above is deemed to be the amount or value of the distribution for the purpose of that section;
but no repayment shall be made of any income tax treated by virtue of this subsection as having been paid.
(1B)Where in any year of assessment the income of any trustees which is chargeable to income tax in accordance with section 686 includes any non-qualifying distribution (within the meaning of subsection (2) below), the trustees’ liability under any assessment made in respect of income tax at the [F68Schedule F trust rate] on the amount or value of the distribution, or on any part of the distribution, shall be reduced by a sum equal to income tax at the [F61Schedule F ordinary rate] on so much of the distribution as is assessed at the [F68Schedule F trust rate] .]
(2)Where a person has paid tax (“the tax paid”) in respect of excess liability on, or on any part of, a non-qualifying distribution, then if, apart from this subsection, he would be liable to pay an amount of tax in respect of excess liability on, or on any part of, a repayment of the share capital or of the principal of the security which constituted that non-qualifying distribution, he shall be so liable only to the extent (if any) to which that amount exceeds the amount of the tax paid.
In this subsection—
“excess liability” means the excess of liability to income tax over what it would be if all income tax [F69were charged—
in the case of income chargeable under Schedule F, at the Schedule F ordinary rate, and
in the case of any other income, at the lower rate,
to the exclusion of the higher rate, the Schedule F upper rate or, as the case may be, the Schedule F trust rate];
“non-qualifying distribution” means a distribution which is not a qualifying distribution.
Textual Amendments
F60S. 233(1)(a)(b) substituted (with effect in accordance with s. 121(8) of the amending Act) by Finance Act 1996 (c. 8) {s. 122(3)}
F61Words in s. 233(1)-(1B) substituted (with effect in accordance with Sch. 4 para. 6(5) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para 6(2)
F62Words in s. 233(1)(c) repealed (with effect for the year 1993-94 and subsequent years of assessment) by 1993 c. 34, ss. 79, 213, Sch. 6 paras. 2(1)(b), 25(1), Sch. 23 Pt.3
F63Words in s. 233(1) inserted (with effect in accordance with Sch. 24 para. 1(4)-(6) of the amending Act) by Finance Act 2004 (c. 12), Sch. 24 para. 1(3)
F64S. 233(1A)(1B) inserted (with effect for the year 1993-94 and subsequent years of assessment) by 1993 c. 34, s. 79, Sch. 6 paras. 2(2), 25(1)
F65S. 233(1A)(a)(i) substituted (with effect in accordance with s. 121(8) of the amending Act) by Finance Act 1996 (c. 8), s. 122(4)(a)
F66S. 233(1A)(a)(ii) substituted (with effect in accordance with Sch. 7 para. 12(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 7 para. 12(3)
F67Words in s. 233(1A)(a) substituted (with effect in accordance with s. 121(8) of the amending Act) by Finance Act 1996 (c. 8), s. 122(4)(b)
F68Words in s. 233(1B) substituted (with effect in accordance with Sch. 4 para. 6(5) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 6(4)
F69S. 233(2): words in the definition of "excess liability" substituted (with effect in accordance with Sch. 4 para. 6(5) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 6(4)
Marginal Citations
M54Source—1972 s.87(5), (6)
(1)M55Without prejudice to [F70section 234A]. . . , a company which makes a qualifying distribution shall, if the recipient so requests in writing, furnish to him a statement in writing showing the amount or value of the distribution and (whether or not the recipient is a person entitled to a tax credit in respect of the distribution) the amount of the tax credit to which a recipient who is such a person is entitled in respect of that distribution.
(2)The duty imposed by subsection (1) above shall be enforceable at the suit or instance of the person requesting the information.
F71(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F71(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)M56Where a company makes a distribution which is not a qualifying distribution it shall make a return to the inspector—
(a)within 14 days from the end of the accounting period in which the distribution is made; or
(b)if the distribution is made on a date not falling in an accounting period, within 14 days from that date.
(6)A return under subsection (5) above shall contain—
(a)particulars of the transaction giving rise to the distribution; and
(b)the name and address of the person, or each of the persons, receiving the distribution, and the amount or value of the distribution received by him or by each of them.
(7)Where it is not in the circumstances apparent whether a transaction gives rise to a distribution in respect of which a return is required to be made under subsection (5) above, the company shall—
(a)within the time within which such a return would be required to be made if the transaction did give rise to such a distribution, make a return to the inspector containing particulars of the transaction in question; and
(b)if required by a notice served on the company by the inspector, furnish him within the time specified in the notice with such further information in relation to the transaction as he may reasonably require.
(8)If it appears to the inspector that particulars of any transaction ought to have been and have not been included in a return under subsection (5) or (7) above, he may by a notice served on the company require the company to furnish him within the time specified in the notice with such information relating thereto as he may reasonably require.
(9)Any power which the inspector may exercise under [F72paragraphs 2 to 4 of Schedule 12 to the Finance Act 1989 for the purposes of the relevant provisions (as defined in paragraph 1 of that Schedule)] may be exercised by him for the purposes of subsections (5) to (8) above.
Textual Amendments
F70Words in s. 234(1) substituted (with application in relation to distributions begun after 16.7.1992) by Finance (No. 2) Act 1992 (c. 48), s. 32(2)(a)(4).
F71S. 234(3)(4) repealed (with application in relation to distributions begun after 16.7.1992) by Finance (No. 2) Act 1992 (c. 48), ss. 32(2)(b)(4), 82, Sch. 18 Pt.VII.
F721989 s.107and Sch.12 para.11.Previously
“paragraph 17 of Schedule 19 for the purposes of that Schedule”.
Modifications etc. (not altering text)
C23S. 234 applied (16.8.1995) by The Venture Capital Trust Regulations 1995 (S.I. 1995/1979), reg. 21(2)
Marginal Citations
M55Source—1970 s.232(4); 1972 Sch.24 18
M56Source—1972 Sch.21
(1)This section applies where dividend or interest is distributed by a company which is—
(a)a company within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986, or
(b)a company created by letters patent or by or in pursuance of an Act.
(2)If the company makes a payment of dividend or interest to any person, and subsection (3) below does not apply, within a reasonable period the company shall send an appropriate statement to that person.
(3)If the company makes a payment of dividend or interest into a bank or building society account held by any person, within a reasonable period the company shall send an appropriate statement to either—
(a)the bank or building society concerned, or
(b)the person holding the account.
(4)In a case where—
(a)a statement is received by a person under subsection (2) or (3)(b) above,
(b)the whole or part of the sum concerned is paid to or on behalf of the person as nominee for another person, and
(c)the nominee makes a payment of the sum or part to the other person and subsection (5) below does not apply,
within a reasonable period the nominee shall send an appropriate statement to that person.
(5)In a case where—
(a)a statement is received by a person under subsection (2) or (3)(b) above,
(b)the whole or part of the sum concerned is paid to or on behalf of the person as nominee for another person, and
(c)the nominee makes a payment of the sum or part into a bank or building society account held by the other person,
within a reasonable period the nominee shall send an appropriate statement to either the bank or building society concerned or the other person.
(6)In the case of a payment of interest which is not a qualifying distribution or part of a qualifying distribution, references in this section to an appropriate statement are to a written statement showing—
(a)the gross amount which, after deduction of the income tax appropriate to the interest, corresponds to the net amount actually paid,
(b)the rate and the amount of income tax appropriate to such gross amount,
(c)the net amount actually paid, and
(d)the date of the payment.
(7)In the case of a payment of dividend or interest which is a qualifying distribution or part of a qualifying distribution, references in this section to an appropriate statement are to a written statement showing—
(a)the amount of the dividend or interest paid,
(b)the date of the payment, and
(c)the amount of the tax credit to which a person is entitled in respect of the dividend or interest, or to which a person would be so entitled if he had a right to a tax credit in respect of the dividend or interest.
(8)In this section “send” means send by post.
[F74(8A)In this section “bank” has the meaning given by section 840A.]
(9)If a person fails to comply with subsection (2), (3), (4) or (5) above, the person shall incur a penalty of £60 in respect of each offence, except that the aggregate amount of any penalties imposed under this subsection on a person in respect of offences connected with any one distribution of dividends or interest shall not exceed £600.
(10)The Board may by regulations provide that where a person is under a duty to comply with subsection (2), (3), (4) or (5) above, the person shall be taken to comply with the subsection if the person either—
(a)acts in accordance with the subsection concerned, or
(b)acts in accordance with rules contained in the regulations;
and subsection (9) above shall be construed accordingly.
(11)Regulations under subsection (10) above may make different provision for different circumstances.]
Textual Amendments
F73S. 234A inserted (with application in relation to distributions begun after 16.7.1992) by Finance (No. 2) Act 1992 (c. 48), s. 32(1)(4).
F74S. 234A(8A) inserted (with application in accordance with Sch. 37 para. 7 of the amending Act) by Finance Act 1996 (c. 8), Sch. 37 para. 2(1)(2)(a)
Modifications etc. (not altering text)
C24S. 234A applied (with modifications) (1.4.2006 with effect in accordance with reg. 1(2) of the affecting S.I.) by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), regs. 1(1), 70 (as amended (1.9.2009) by The Authorised Investment Funds (Tax) (Amendment) Regulations 2009 (S.I. 2009/2036), regs. 1, 2, 25)
C25S. 234A applied (1.9.2009 with effect in accordance with reg. 1(2) of the affecting S.I.) by The Investment Trusts (Dividends) (Optional Treatment as Interest Distributions) Regulations 2009 (S.I. 2009/2034), regs. 1(1), 21
C26S. 234A(4) excluded (6.4.2003 with effect in accordance with s. 723(1) of the affecting Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 493(3) (with s. 493(5), Sch. 7)
C27S. 234A(4)-(11) applied (6.4.2003 with effect in accordance with s. 723(1) of the affecting Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 2 para. 80(4) (with Sch. 7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F75Ss. 235-237 repealed (with effect in accordance with Sch. 4 para. 7(2), Sch. 8 Pt. 2(9) Note 3 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 7(1), Sch. 8 Pt. 2(9)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F76Ss. 235-237 repealed (with effect in accordance with Sch. 4 para. 7(2), Sch. 8 Pt. 2(9) Note 3 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 7(1), Sch. 8 Pt. 2(9)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F77Ss. 235-237 repealed (with effect in accordance with Sch. 4 para. 7(2), Sch. 8 Pt. 2(9) Note 3 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 7(1), Sch. 8 Pt. 2(9)
F78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F78S. 238 repealed (with effect in accordance with Sch. 3 para. 11(2) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 11(1), Sch. 27 Pt. 3(2), Note
F79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F79S. 239 repealed (with effect in accordance with Sch. 3 para. 12(2) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 12(1), Sch. 27 Pt. 3(2), Note (with Sch. 3 para. 12(3)-(6))
F80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F80S. 240 repealed (with effect in accordance with Sch. 3 para. 13(2) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 13(1), Sch. 27 Pt. 3(2), Note
F81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F81S. 241 repealed (with effect in accordance with Sch. 3 para. 14(2) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 14(1), Sch. 27 Pt. 3(2), Note
F82. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F82Ss. 242-244 repealed (with effect in accordance with s. 20(1)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 20(5), Sch. 8 Pt. 2(4), Note
F83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F83Ss. 242-244 repealed (with effect in accordance with s. 20(1)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 20(5), Sch. 8 Pt. 2(4), Note
F84. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F84Ss. 242-244 repealed (with effect in accordance with s. 20(1)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), s. 20(5), Sch. 8 Pt. 2(4), Note
F85. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F85S. 245 repealed (with effect in accordance with Sch. 3 para. 15(2) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 15(1), Sch. 27 Pt. 3(2), Note
F87. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]
Textual Amendments
F86Ss. 245A, 245B inserted (in relation to changes in ownership on or after 14 March 1989) by Finance Act 1989 (c. 26), s. 98
F87S. 245A repealed (with effect in accordance with Sch. 3 para. 16(2) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 16(1), Sch. 27 Pt. 3(2), Note
F88. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F88S. 245B repealed (with effect in accordance with Sch. 3 para. 17(2)(3) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 17(1), Sch. 27 Pt. 3(2), Note
F89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F89S. 246 repealed (with effect in accordance with Sch. 3 para. 18(2) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 18(1), Sch. 27 Pt. 3(2), Note
Textual Amendments
F90Pt. 6 Ch. 5A (ss. 246A-246Y) inserted (3.5.1994) by Finance Act 1994 (c. 9), Sch. 16 para. 1
F91Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F92. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F92Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F93. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F93Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F94. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F94Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F95Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F96. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F96Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F97. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F97Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F98. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F98Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F99Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F100Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F101Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F102. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F102Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F103. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F103Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F104. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F104Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F105. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F105Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F106. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F106Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F107Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F108. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F108Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F109. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F109Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F110. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F110Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F111. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F111Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F112. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F112Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F113. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F113Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F114. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F114Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F115. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]
Textual Amendments
F115Ss. 246A-246Y (Pt. 6 Ch. 5A) repealed (with effect in accordance with Sch. 6 para. 3(2)-(4) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 3(1), Sch. 8 Pt. 2(11), Note
F116. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F116S. 247 repealed (with application in accordance with s. 85(6), Sch. 33 Pt. 2(10) Note of the repealing Act) by Finance Act 2001 (c. 9), s. 85(5), Sch. 33 Pt. 2(10)
F117. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F117S. 248 repealed (with application in accordance with s. 85(6), Sch. 33 Pt. 2(10) Note of the repealing Act) by Finance Act 2001 (c. 9), s. 85(5), Sch. 33 Pt. 2(10)
(1)M57Subject to subsections (7) to (9) below, this section applies to any of the following share capital, that is to say—
(a)any share capital issued by a company resident in the United Kingdom in consequence of the exercise by any person of an option conferred on him to receive in respect of shares in the company (whether the last-mentioned shares were issued before or after the coming into force of this section) either a dividend in cash or additional share capital; and
(b)any bonus share capital issued by a company so resident in respect of any shares in the company of a relevant class (whether the last-mentioned shares were issued before or after the coming into force of this section).
(2)For the purposes of subsection (1)(b) above a class of shares is a relevant class if—
(a)shares of that class carry the right to receive bonus share capital in the company of the same or a different class; and
(b)that right is conferred by the terms on which shares of that class were originally issued or by those terms as subsequently extended or otherwise varied.
(3)Where a company issues any share capital in a case in which two or more persons are entitled thereto, the following provisions of this sectionand paragraph 12(1)to (3)of Schedule 19 F118 shall have effect as if the company had issued to each of those persons separately a part of that share capital proportionate to his interest therein on the due date of issue.
(4)Subject to the following provisions of this section, where a company issues any share capital in a case in which an individual is beneficially entitled to that share capital, that individual shall be treated as having received on the due date of issue income of an amount which, if reduced by an amount equal to income tax on that income at the [F119Schedule F ordinary rate] for the year of assessment in which that date fell, would be equal to the appropriate amount in cash, and—
(a)[F120the individual shall be treated as having paid income tax at the [F121Schedule F ordinary rate] on that income] or, if his total income is reduced by any deductions, on so much of it as is part of his total income as so reduced;
(b)no repayment shall be made of income tax treated by virtue of paragraph (a) above as having been paid; and
(c)that income shall be treated [F122[F123(without prejudice to paragraph (a) above) as if it were income to which section 1A applies [F124as it applies to income chargeable under Schedule F], but]shall be treated] for the purposes of sections 348 and 349(1) as not brought into charge to income tax.
(5)Where a company issues any share capital to the personal representatives of a deceased person as such during the administration period, the amount of income which, if the case had been one in which an individual was beneficially entitled to that share capital, that individual would have been treated under subsection (4) above as having received shall be deemed for the purposes of Part XVI to be part of the aggregate income of the estate of the deceased.
This subsection shall be construed as if it were contained in Part XVI.
(6)Where a company issues any share capital to trustees in respect of any shares in the company held by them (or by them and one or more other persons) in a case in which a dividend in cash paid to the trustees in respect of those shares would have been to any extent income to which section 686 applies, then—
(a)there shall be ascertained the amount of income which, if the case had been one in which an individual was beneficially entitled to that share capital, that individual would have been treated under subsection (4) above as having received; and
(b)income of that amount shall be treated as having arisen to the trustees on the due date of issue and as if it had been chargeable to income tax at the [F125Schedule F ordinary rate]; and
(c)paragraphs (a) to (c) of subsection (4) above shall, with the substitution of “ income ” for “total income” and with all other necessary modifications, apply to that income as they apply to income which an individual is treated as having received under that subsection.
(7)M58This section does not apply to—
(a)any share capital of which the due date of issue is earlier than 6th April 1975; or
(b)any share capital issued by a company in respect of shares in the company which confer on the holder a right to convert or exchange them into or for shares in the company of a class which is not a relevant class for the purposes of subsection (1)(b) above where the due date of issue of the share capital so issued precedes the earlier of the following dates, namely—
(i)the day next after the earliest date after 5th August 1975 on which conversion or exchange of the shares could be effected by an exercise of that right; and
(ii)6th April 1976 or, in the case of share capital issued by an investment trust, 6th April 1977.
(8)Where, in a case within subsection (4) above, the share capital in question is issued in respect of shares in the company issued before 6th April 1975 which confer on the holder a right to convert or exchange them into or for shares of a different class, this section shall not apply to so much (if any) of any bonus share capital issued by the company after 5th April 1976 in connection with an exercise of that right as would have been issued if that right had been exercised so as to effect the conversion or exchange of the shares on the earliest possible date after 5th April 1975; and subsections (5) and (6) above shall, where applicable, have effect accordingly.
(9)Where any bonus share capital falling within subsection (1)(b) above is after 5th April 1975 converted into or exchanged for shares in the company in question of a different class, then—
(a)this section shall not apply to any shares in the company issued, in connection with the conversion or exchange, in consideration of the cancellation, extinguishment or acquisition by the company of that bonus share capital; but
(b)section 230(a) and (b) shall apply to any shares in the company issued, in connection with the conversion or exchange, in consideration of the cancellation, extinguishment or acquisition by the company of so much of that bonus share capital as caused an individual to be treated under subsection (4) above as having received an amount of income on the due date of issue (or would have done so if the case had been one in which an individual was beneficially entitled to that share capital).
Textual Amendments
F118 Words repealed by 1989 s.187and Sch.17 Part Vin relation to accounting periods beginning after 31March 1989.
F119Words in s. 249(4) substituted (with effect in accordance with Sch. 4 para. 10(4) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 10(2)(a)
F120Words in s. 249(4)(a) substituted (with effect in accordance with s. 121(8) of the amending Act) by Finance Act 1996 (c. 8), s. 122(5)(b)
F121Words in s. 249(4)(a) substituted (with effect in accordance with Sch. 4 para. 10(4) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 10(2)(b)
F122Words in s. 249(4)(c) inserted (16.7.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance (No. 2) Act 1992 (c. 48), s. 19(4)(7)
F123Words in s. 249(4)(c) substituted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 1996 (c. 8), Sch. 6 para. 6
F124Words in s. 249(4)(c) inserted (with effect in accordance with Sch. 4 para. 10(4) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 10(2)(b)
F125Words in s. 249(6)(b) substituted (with effect in accordance with Sch. 4 para. 10(4) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 10(4)
Modifications etc. (not altering text)
C28 See Sch.10 para.5—profit sharing schemes.
Marginal Citations
M57Source—1975 (No.2) s.34(1)-(6)
M58Source—1975 (No.2) s.34(9)-(11)
(1)M59A company shall for each of its accounting periods make, in accordance with this section, returns to the inspector of all share capital to which section 249 applies (“relevant share capital”) and which was issued by it in that period.
(2)M60A return shall be made for—
(a)each complete quarter falling within the accounting period, that is to say, each of the periods of three months ending with 31st March, 30th June, 30th September or 31st December which falls within that period;
(b)each part of the accounting period which is not a complete quarter and ends on the first (or only), or begins immediately after the last (or only), of those dates which falls within the accounting period;
(c)if none of those dates falls within the accounting period, the whole accounting period.
(3)A return for any period for which a return is required to be made under this section (a “return period”) shall be made within 30 days from the end of that period.
(4)M61No return need be made under this section by a company for any period in which it has issued no relevant share capital.
(5)The return made by a company for any return period shall state—
(a)the date on which any relevant share capital issued by it in the period was issued and, if different, the date on which the company was first required to issue it;
(b)particulars of the terms on which any such share capital so issued by it was issued; and
(c)what is, in relation to any such share capital so issued, the appropriate amount in cash.
(6)If it appears to the inspector that a company ought to have, but has not, made a return for any return period, he may (notwithstanding subsection (4) above) by notice require the company to make a return for that period within such time (not being less than 30 days) as may be specified in the notice; and a return required to be made under this subsection shall, if such be the case, state that no relevant share capital was issued in the period in question.
(7)As regards any share capital included in a return made under this section by a company, the inspector may by notice require the company to furnish him within such time (not being less than 30 days) as may be specified in the notice with such further information relating thereto as he may reasonably require for the purposes of sections 230 and 249, this section and section 251and paragraph 12of Schedule 19 F126.
Textual Amendments
F126Words in s. 250(7) repealed by Finance Act 1989 (c. 26), s. 187, Sch. 17 Part V (in relation to accounting periods beginning after 31 March 1989).
Marginal Citations
M59Source—1975 (No.2) Sch.8 7(1)
M60Source—1975 (No.2) Sch.8 7(2)
M61Source—1975 (No.2) Sch.8 7(3)-(6)
M62(1)For the purposes of sections 249 and 250 —
(a)“ ”, in relation to a company, means share capital issued by the company otherwise than wholly for new consideration or such part of any share capital so issued as is not properly referable to new consideration;
(b)“due date of issue”, in relation to any share capital issued by a company, means the earliest date on which the company was required to issue that share capital;
(c)an option to receive either a dividend in cash or additional share capital is conferred on a person not only where he is required to choose one or the other, but also where he is offered the one subject to a right, however expressed, to choose the other instead, and a person’s abandonment of, or failure to exercise, such a right is to be treated as an exercise of the option;
and in section 254 the definition of “security” (in subsection (1)) and subsections (5) and (11) shall not apply.
(2)M63In sections 249 and 250 “the appropriate amount in cash”, in relation to any share capital to which section 249 applies—
(a)in a case where that share capital was issued —
(i)in consequence of the exercise of an option such as is mentioned in section 249(1)(a); or
(ii)in a quantity which is determined by or determines the amount of a dividend in cash payable in respect of share capital in the company of a different class,
and where the relevant cash dividend is not substantially greater nor substantially less than the market value of that share capital on the relevant date, means the amount of the relevant cash dividend or, in a case in which section 249(3) applies, a due proportion of that amount;
(b)in a case where paragraph (a) above does not apply, means the market value of that share capital on the relevant date or, in a case in which section 249(3) applies, a due proportion of that market value.
(3)M64In subsection (2) above—
“the relevant cash dividend”, in a case falling within subsection (2)(a)(i) above, means the cash dividend mentioned in section 249(1)(a) or, in a case falling within subsection (2)(a)(ii) above, means the cash dividend there mentioned (subject to subsection (4) below);
“the relevant date”, in the case of share capital listed in the Stock Exchange Daily Official List, means the date of first dealing and, in the case of share capital not so listed, means the due date of issue; and
“market value”, in relation to any share capital in a company, means, subject to the provisions applied by subsections (5) and (6) below, the price which that share capital might reasonably be expected to fetch on a sale in the open market.
(4)M65Where, in a case falling within subsection (2)(a)(ii) above, the company on the occasion on which it issues the share capital in question also issues a dividend in cash (“the accompanying cash dividend”) in respect of the shares in the company in respect of which that share capital is issued, “the relevant cash dividend” means the cash dividend mentioned in subsection (2)(a)(ii) above reduced by the amount of the accompanying cash dividend.
(5)M66Section [F127272(3) of the 1992 Act] (market value of shares or securities [F128quoted] in the Stock Exchange Daily Official List) shall apply for the purposes of subsection (3) above as it applies for the purposes of that Act.
(6)In the case of shares or securities which are not quoted on a recognised stock exchange at the time when their market value for the purposes of subsection (2) above falls to be determined, subsection (3) of section [F127273 of the 1992 Act] shall apply with respect to the determination of their market value for those purposes as it applies with respect to a determination falling within subsection (1) of that section.
Textual Amendments
F127Words in s. 251(5)(6) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 14(16) (with ss. 60, 101(1), 171, 201(3)).
F128Word in s. 251(5) substituted (with effect in accordance with Sch. 38 para. 8(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 38 para. 8(1)
Modifications etc. (not altering text)
C29S. 251(1)(c) applied (19.3.1997) by Finance Act 1997 (c. 16), Sch. 7 para. 4(2)
Marginal Citations
M62Source—1975 (No.2) s.34(8)(a)-(d)
M63Source—1975 (No.2) Sch.8 1(1)-(3)
M64Source—1975 (No.2) Sch.8 1(4), 2(1)
M65Source—1970 (No.2) Sch.8 1(5)
M66Source—1975 (No.2) Sch.8 2(2), (3); 1979(C) Sch.7
Textual Amendments
F129Ss. 251A-251D and preceding cross-heading inserted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 34 (with Sch. 7)
(1)Sections 251B and 251C apply for income tax purposes in connection with shares awarded under an approved share incentive plan.
(2)But those sections do not apply to an individual if, at the time of the award of shares in question—
(a)the earnings from the eligible employment are not (or would not be if there were any) general earnings to which any of the charging provisions of Chapter 4 or 5 of Part 2 of ITEPA 2003 apply, or
(b)in the case of an award made before 6th April 2003, he was not chargeable to tax under Schedule E in respect of the employment by reference to which he met the requirement of paragraph 14 of Schedule 8 to the Finance Act 2000 (employee share ownership plans: the employment requirement) in relation to the plan.
(3)For the purposes of subsection (2)—
(a)“the eligible employment” means the employment which results in the individual meeting the employment requirement in relation to the plan, and
(b)the reference to any of the charging provisions of Chapter 4 or 5 of Part 2 of ITEPA 2003 has the same meaning as it has in the employment income Parts of that Act (see sections 14(3) and 20(3) of that Act).
Modifications etc. (not altering text)
C30Ss. 251A-251D applied (6.4.2003 with effect in accordance with s. 723(1) of the affecting Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 2 para. 87 (with Sch. 7)
(1)Where a cash dividend is paid over to a participant under paragraph 68(4) of Schedule 2 to ITEPA 2003 (cash dividend paid over if not reinvested), the participant is chargeable to tax on the appropriate amount under Schedule F for the year of assessment in which the dividend is paid over.
(2)In subsection (1), the “appropriate amount” means the amount of the dividend paid over (except to the extent that it represents a foreign cash dividend).
(3)For the purposes of determining the tax credit (if any) to which the participant is entitled under section 231, the reference in subsection (1) of that section to the tax credit fraction in force when the distribution is made shall be read as a reference to the fraction in force when the dividend is paid over to the participant.
Modifications etc. (not altering text)
C31Ss. 251A-251D applied (6.4.2003 with effect in accordance with s. 723(1) of the affecting Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 2 para. 87 (with Sch. 7)
(1)If dividend shares cease to be subject to the plan before the end of the period of three years beginning with the date on which the shares were acquired on the participant’s behalf, the participant is chargeable to tax on the appropriate amount under Schedule F for the year of assessment in which the shares cease to be subject to the plan.
(2)In subsection (1) “the appropriate amount” means the amount of the cash dividend applied to acquire the shares on the participant’s behalf (except to the extent that it represents a foreign cash dividend).
(3)For the purposes of determining the tax credit (if any) to which the participant is entitled under section 231, the reference in subsection (1) of that section to the tax credit fraction in force when the distribution is made shall be read as a reference to the fraction in force when the shares cease to be subject to the plan.
(4)Where the participant is charged to tax under this section the tax due shall be reduced by the amount or aggregate amount of any tax paid on any capital receipts under section 501 of ITEPA 2003 in respect of those shares.
(5)In subsection (4) “the tax due” means the amount of tax due after deduction of the tax credit determined under subsection (3).
(6)This section has effect subject to section 498 of ITEPA 2003 (no charge on shares ceasing to be subject to plan in certain circumstances).
Modifications etc. (not altering text)
C32Ss. 251A-251D applied (6.4.2003 with effect in accordance with s. 723(1) of the affecting Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 2 para. 87 (with Sch. 7)
(1)Sections 251A to 251C and this section form part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).
(2)Accordingly, expressions used in those sections and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index.
(3)In sections 251B and 251C “foreign cash dividend” means a cash dividend paid in respect of plan shares in a company not resident in the United Kingdom.]
Modifications etc. (not altering text)
C33Ss. 251A-251D applied (6.4.2003 with effect in accordance with s. 723(1) of the affecting Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 2 para. 87 (with Sch. 7)
(1)If an inspector discovers that—
(a)F130. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)any set-off or payment of tax credit,
ought not to have been made, or is or has become excessive, the inspector may make any such assessments as may in his judgment be required for recovering any tax that ought to have been paid or any payment of tax credit that ought not to have been made and generally for securing that the resulting liabilities to tax (including interest on unpaid tax) of the persons concerned are what they would have been if only such set-offs or payments had been made as ought to have been made.
(2)In any case where—
(a)interest has been paid under section 826 on a payment of tax credit; and
(b)interest ought not to have been paid on that payment, either at all or to any extent,
an assessment under this section may be made for recovering any interest that ought not to have been paid.
(3)Where—
(a)an assessment is made under this section to recover tax credit paid to a company in respect of franked investment income received by the company in an accounting period; and
(b)more than one payment of tax credit has been made in respect of that period,
any sum recovered shall as far as possible be treated as relating to a payment of tax credit made later rather than to a payment made earlier.
(4)Subsections (2) and (3) above shall have effect in relation to payments of tax credit claimed in respect of accounting periods ending after such day as may be appointed for the purpose of those subsections by order made by the Treasury, not being earlier than 31st March 1992.
(5)The Management Act shall apply to any assessment under this section for recovering a payment of tax credit or interest on such a payment as if it were an assessment to income tax for the year of assessment, or in the case of a company, corporation tax for the accounting period, in respect of which the payment was claimed, and as if that payment represented a loss of tax to the Crown; and any sum charged by any such assessment shall, subject to any appeal against the assessment, be due within 14 days after the issue of the notice of assessment.
Subordinate Legislation Made
P1S. 252(4) power exercised: 30.9.1993 appointed for the purposes of s. 252(2)(3) by S.I. 1992/3066, art. 2(2)(b).
Textual Amendments
F130S. 252(1)(a) repealed (with effect in accordance with Sch. 3 para. 21(3) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 21(2), Sch. 27 Pt. 3(2), Note
Modifications etc. (not altering text)
C34S. 252 modified (27.7.1993) by 1993 c. 34, s. 80(8)
C35S. 252 modified (16.8.1995) by The Venture Capital Trust Regulations 1995 (S.I. 1995/1979), reg. 15(4)(5)
C36S. 252 applied (16.8.1995) by The Venture Capital Trust Regulations 1995 (S.I. 1995/1979), reg. 20
C37S. 252 modified (31.7.1997) by Finance (No. 2) Act 1997 (c. 58), s. 35(10)
C38 See 1989 s.157(1)for reckonable date for interest charge under 1970(M) s.86where assessment made to recover corporation tax payable as the result of a claim under s.240made on or after 14March 1989. (Ceases to have effect for accounting periods ending after the day appointed for the purposes of s.86).
Marginal Citations
M67Source—1972 s.102; (No.2) s.88(5)-(7)
M68(1)The Board may by regulations—
(a)modify, supplement or replace any of the provisions of subsections (5) to (9) of section 234 for the purpose of requiring companies resident in the United Kingdom to make returns and give information to the inspector in respect of distributions made by them, whether before or after the passing of this Act, which are not qualifying distributions;
(b)F131. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
and references in this Act and in any other enactment to section 234(5) to (9) F132. . . shall be construed as including references to any such regulations.
(2)F133. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)Regulations under this section may—
(a)make different provision for different descriptions of companies and for different circumstances and may authorise the Board, where in their opinion there are special circumstances justifying it, to make special arrangements as respects F134. . . the repayment of income tax borne by a company or the payment to a company of amounts in respect of any tax credit to which it is entitled;
(b)include such transitional and other supplemental provisions as appear to the Board to be expedient or necessary.
(4)The Board shall not make any regulations under this section unless a draft of them has been laid before and approved by a resolution of the House of Commons.
Textual Amendments
F131S. 253(1)(b) repealed (with effect in accordance with Sch. 3 para. 22(5) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 22(2)(a), Sch. 27 Pt. 3(2), Note
F132Words in s. 253(1) repealed (with effect in accordance with Sch. 3 para. 22(5) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 22(2)(b), Sch. 27 Pt. 3(2), Note
F133S. 253(2) repealed (with effect in accordance with Sch. 3 para. 22(5) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 22(3), Sch. 27 Pt. 3(2), Note
F134Words in s. 253(3)(a) repealed (with effect in accordance with Sch. 3 para. 22(5) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 22(4), Sch. 27 Pt. 3(2), Note
Marginal Citations
M68Source—1972 s.108
(1)M69In this Part, except where the context otherwise requires—
“new consideration” means, subject to subsections (5) and (6) below, consideration not provided directly or indirectly out of the assets of the company, and in particular does not include amounts retained by the company by way of capitalising a distribution;
“security” includes securities not creating or evidencing a charge on assets, and interest paid by a company on money advanced without the issue of a security for the advance, or other consideration given by a company for the use of money so advanced, shall be treated as if paid or given in respect of a security issued for the advance by the company;
“
” includes stock, and any other interest of a member in a company;and in this section “a 90 per cent. group” means a company and all of its 90 per cent. subsidiaries.
(2)M70In this Part, the expressions “ ” and “in respect of securities of the company”, in relation to a company which is a member of a 90 per cent. group, mean respectively in respect of shares in that company or any other company in the group and in respect of securities of that company or any other company in the group.
(3)Without prejudice to section 209(2)(b) as extended by subsection (2) above, in relation to a company which is a member of a 90 per cent. group, “distribution” includes anything distributed out of assets of the company (whether in cash or otherwise) in respect of shares in or securities of another company in the group.
(4)Nothing in subsections (2) and (3) above shall require a company to be treated as making a distribution to any other company which is in the same group and is resident in the United Kingdom.
(5)M71Where share capital has been issued at a premium representing new consideration, any part of that premium afterwards applied in paying up share capital shall be treated as new consideration also for that share capital, except in so far as the premium has been taken into account under section 211(5) so as to enable a distribution to be treated as a repayment of share capital.
(6)M72Subject to subsection (7) below, no consideration derived from the value of any share capital or security of a company, or from voting or other rights in a company, shall be regarded for the purposes of this Part as new consideration received by the company unless the consideration consists of—
(a)money or value received from the company as a qualifying distribution;
(b)money received from the company as a payment which for those purposes constitutes a repayment of that share capital or of the principal secured by the security; or
(c)the giving up of the right to the share capital or security on its cancellation, extinguishment or acquisition by the company.
(7)No amount shall be regarded as new consideration by virtue of subsection (6)(b) or (c) above in so far as it exceeds any new consideration received by the company for the issue of the share capital or security in question or, in the case of share capital which constituted a qualifying distribution on issue, the nominal value of that share capital.
(8)M73Where two or more companies enter into arrangements to make distributions to each other’s members, all parties concerned (however many) may for the purposes of this Part be treated as if anything done by any one of those companies had been done by any of the others.
(9)M74A distribution shall be treated under this Part as made, or consideration as provided, out of assets of a company if the cost falls on the company.
(10)M75References in this Part to issuing share capital as paid up apply also to the paying up of any issued share capital.
(11)M76Where securities are issued at a price less than the amount repayable on them, and are not [F135listed] on a recognised stock exchange, the principal secured shall not be taken for the purposes of this Part to exceed the issue price, unless the securities are issued on terms reasonably comparable with the terms of issue of securities so [F135listed].
(12)M77For the purposes of this Part a thing is to be regarded as done in respect of a share if it is done to a person as being the holder of the share, or as having at a particular time been the holder, or is done in pursuance of a right granted or offer made in respect of a share; and anything done in respect of shares by reference to share holdings at a particular time is to be regarded as done to the then holders of the shares or the personal representatives of any share holder then dead.
This subsection shall apply in relation to securities as it applies in relation to shares.
Textual Amendments
F135Words in s. 254(11) substituted (with effect in accordance with Sch. 38 para. 6(6) of the amending Act) by Finance Act 1996 (c. 8), Sch. 38 para. 6(1)(2)(d)
Marginal Citations
M69Source—1970 s.237(1), (3), (5); 1972 Sch.22 10(4)
M70Source—1972 Sch.22 10(1)-(3)
M71Source—1970 s.237(1)
M72Source—1972 Sch.22 8
M73Source—1972 Sch.22 9
M74Source—1970 s.237 (2)
M75Source—1970 s.237(4)
M76Source—1970 s.237(6)
M77Source—1970 s.237(7)
F136. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F136S. 255 repealed (with effect in accordance with Sch. 3 para. 23(2) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 23(1), Sch. 27 Pt. 3(2), Note
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