Commentary

D7.1138 Distributions —holders of excessive rights

Corporate tax
Corporate tax | Commentary

D7.1138 Distributions —holders of excessive rights

Corporate tax | Commentary

D7.1138 Distributions —holders of excessive rights

The purpose of the provisions described in this article (commonly referred to as the '10% shareholder rule') is to ensure that the Exchequer is able to collect a certain amount of tax in respect of property rental business profits when they are paid out to shareholders as distributions. But for these provisions, where a non-UK corporate shareholder, holding rights to 10% or more of the shares, dividends or voting rights in a company UK REIT and resident in a country with a tax treaty with the UK, receives a distribution, it would potentially be able to make a full reclaim of any tax withheld; effectively removing those profits from the UK tax net.

Specific provisions (contained in CTA 2010)1 therefore provide that a tax penalty will be imposed if a distribution is paid to a corporate shareholder

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