Section 1285: UK company distributions
3291.This section sets out the exemption from the charge to corporation tax on dividends and other distributions made by a UK resident company. It is based on section 208 of ICTA.
3292.The judgement in the case of Strand Options and Futures Ltd v Vojak, 76 TC 220 CA(8), provides judicial interpretation of section 208 of ICTA. The Court of Appeal held that the exemption referred specifically to leaving dividends and other distributions out of account in computing income, which does not mean that the amount of a distribution should be left out of account in computing a chargeable gain.
3293.Subsection (2) encapsulates the court’s interpretation of the legislation in respect of distributions and their inclusion in a chargeable gains computation.
3294.Section 337A(1)(a) of ICTA, rewritten as section 1305, denies a deduction in computing profits for corporation tax purposes in respect of dividends and other distributions. The wording of section 208 of ICTA makes no distinction between receipts and deductions in computing income, and it therefore potentially overlaps with section 337A(1)(a) of ICTA. The words “as receipts” have therefore been added to this section to clarify its role.
3295.The section also provides signposts to certain exceptions to the general rule.
STC [2004] 64
