Income Tax Act 2007

688 Receipt of consideration representing company's assets, future receipts or trading stock (circumstance C) U.K.

(1) This section applies in relation to a person (“A”) if subsections (2), (3) and (6) apply.

(2) A receives consideration which—

(a) is or represents the value of—

(i) assets which are available for distribution by a company by way of dividend, or

(ii) assets which would have been so available apart from anything done by the company,

(b) is received in respect of future receipts of a company, or

(c) is or represents the value of trading stock of a company.

(3) The receipt is in consequence of a transaction whereby another person (“B”)—

(a) subsequently receives, or has received, an abnormal amount by way of dividend (see section 692), or

(b) subsequently becomes entitled, or has become entitled—

(i) in respect of securities held or sold by B, or

(ii) in respect of securities formerly held by B,

to a deduction in calculating profits or gains, if the entitlement meets the conditions in subsections (4) and (5).

(4) The entitlement must arise in connection with—

(a) the purchase of securities where the purchase is followed by the sale of the same or other securities,

(b) the sale of securities where the sale is followed by the purchase of the same or other securities,

(c) the distribution, transfer or realisation of assets of a company, or

(d) the application of such assets in discharge of liabilities.

(5) The entitlement must arise because of a fall in the value of the securities resulting from—

(a) the payment of a dividend on them, or

(b) any other dealing with any assets of a company.

(6) The receipt of the consideration is such that A does not pay or bear income tax on it (apart from this Chapter).

(7) The assets mentioned in subsection (2) do not include assets which are shown to represent a return of sums paid by subscribers on the issue of securities, despite the fact that under the law of the country in which the company is incorporated assets of that description are available for distribution by way of dividend.

(8) In this section references to the receipt of consideration include references to the receipt of any money or money's worth.

(9) Subsection (3)(b)(ii) applies whether or not B has sold the securities.