Part 23 Company distributions

Chapter 5 Demergers

Chargeable payments

1089 Meaning of “chargeable payment”: unquoted companies
(1) This section applies if a company concerned in an exempt distribution is an unquoted company and a person makes a payment (to any person) in pursuance of a scheme or arrangement made—
(a) with the unquoted company, or
(b) if the unquoted company—
(i) is under the control of 5 or fewer persons (its “main participators”), and
(ii) is not excepted by subsection (6),
with any of the unquoted company's main participators.
(2) The payment is a chargeable payment if it meets each of conditions B1 to D1.
(3) Condition B1 is that the payment is made—
(a) in connection with the shares in the company (if it is a company) making the payment,
(b) in connection with the shares in any company concerned in the exempt distribution, or
(c) in connection with any transaction affecting the shares mentioned in paragraph (a) or (b).
(4) Condition C1 is that the payment—
(a) is not made for genuine commercial reasons, or
(b) forms part of a tax avoidance scheme.
(5) Condition D1 is that the payment (if made by a company)—
(a) is not a distribution or an exempt distribution, and
(b) is not made to a company that belongs to the same group as that company.
(6) The unquoted company is excepted for the purposes of subsection (1)(b)(ii) if—
(a) it is under the control of (and only of) a company, and
(b) that company is not under the control of 5 or fewer persons.