Produced by Tolley
  • 19 Oct 2021 22:55

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Distributions
  • Introduction to distributions
  • Scope of the distributions regime
  • Basic principles concerning distributions
  • Distributions and small companies
  • Definition of small company
  • The small company exemption
  • Distributions and non-small companies
  • Exempt classes
  • Capital distributions
  • More...

Distributions

Introduction to distributions

Distributions received by UK companies are taxable unless they fall within a particular exempt category, regardless of whether they are paid by UK or overseas companies. The relevant rules are contained in CTA 2009, Part 9A. This guidance note outlines the regime and considers what is included within the meaning of distributions for this purpose.

Scope of the distributions regime

The definition of 'distributions' for the purpose of the corporation tax acts is broad. In overview, it includes the following:

  1. any dividend including capital dividends (this does not include distributions as part of a winding up)

  2. any other distribution out of the assets of the company in respect of shares in the company, whether in cash or otherwise (this does not include the repayment of capital for shares as a distribution)

  3. redeemable share capital or any new security, if not issued for full consideration

  4. interest, or other distribution in respect of non-commercial securities where the consideration given by the company for the loan is more than a reasonable commercial return. Only the excess of interest over a reasonable commercial return is treated as a distribution

  5. interest or other distribution made in respect of 'special securities', which does not fall within the case above relating to non-commercial securities. As above, only the excess of interest over a reasonable commercial return is treated as a distribution

  6. the amount of any benefit received in excess of market value on transfers of assets or liabilities between the company and its members

  7. in certain cases, amounts in respect of bonus issues of shares following a repayment of share capital

CTA 2010, s 1000

It may not be immediately apparent whether an amount is within the definition of 'distribution' for corporation tax purposes. In such cases, the detailed definition should be examined. CTA 2010, s 1000 is supplemented by the remainder of the sections in CTA 2010, ss 998–1028 (Pt 23, Ch 2). The table at CTA 2010, s 1001 sets out

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