Income and Corporation Taxes Act 1988

7 (1) If at the end of the distribution period the distributing company is a member of a group, excess NCDs must be allocated, so far as possible, to the other group companies.

The allocation must be made in accordance with the following rules.

(2) Excess NCDs may not be allocated to a recipient company unless it has available profits for the accounting period to which they are to be allocated.

(3) The amount of a recipient company’s available profits for an accounting period is given by:

where—

BP is the amount of that company’s basic profits for that accounting period, and

NCD is the total amount of non-corporate distributions made (or treated as made) by that company in that period.

(4) The maximum amount of excess NCDs that may be allocated to an accounting period of a recipient company is:

where—

NCD is the total amount of the non-corporate distributions made (or treated as made) by the distributing company in the distribution period;

D is the total amount of all the distributions made (or treated as made) by that company in that period; and

AP is the amount of the recipient company’s available profits for that period.

(5) In determining the amount of a company’s available profits at any time account shall only be taken of excess NCDs allocated to it by virtue of an allocation made before that time that remains (or so far as it remains) effective.