Commentary

D5.153 Non-small company distribution exemption—controlled companies

Corporate tax
Corporate tax | Commentary

D5.153 Non-small company distribution exemption—controlled companies

Corporate tax | Commentary

D5.153 Non-small company distribution exemption—controlled companies

Distributions will be exempt if they fall within one or more of the five exempt classes as summarised in D5.152, one of these is where the distribution is from controlled companies.

A distribution falls within this exemption if1:

  1.  

    •     the recipient controls the payer, or

  2.  

    •     the recipient is one of two persons (recipient A and B) who, taken together, control the payer, and

    1.  

      –     recipient A passes a 40% control test ('recipient A control test' — see below)

    2.  

      –     recipient B passes a different 40% control test ('recipient B control test' — see below)

Controlled companies distribution exemption—meaning of control

The control test for the controlled company distribution exemption comes from the controlled foreign company (CFC) control tests (see D4.404) with some modifications. In broad terms, a company will be controlled by any person or persons who (directly or indirectly) have 'legal' control or 'economic' control of the company.

Legal control

A person controls a company if they have the power to secure that the affairs of the company are conducted in accordance with their wishes2:

  1.  

    •     by means of the holding of shares or the possession of voting power in that or any other company, or

  2.  

    •     by virtue of any powers conferred by the articles of association or other document regulating that or any other

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial