CTM15150 - Distributions: general: tax consequences
ICTA88/S11 (2)(a), ICTA88/S20, ICTA88/S208, ICTA88/S231 (1) & ICTA88/S337 (2)
A distribution by a UK resident company has the following tax consequences.
For distributions made before 6 April 1999
- If a person other than another UK resident company receives the distribution, then it is for tax purposes income chargeable to IT under Schedule F on that person. If the distribution is a qualifying distribution (see CTM20070) and is not an FID (see CTM21000 onwards), the amount of the income is the amount of the distribution plus the tax credit.
The tax credit is equal to such proportion of the amount of the distribution as corresponds to the rate of ACT in force when the distribution is made. Special rules apply if the distribution was made in 1993-94 (see CTM20530).
A distribution chargeable under Schedule F is not chargeable under any other provisions of the Income Tax Acts.
- A distribution paid by a company is not deductible in computing its CT profits. Following payment of a qualifying distribution the company has to account for ACT at the rate in force when the distribution was made.
- Such a distribution received by a UK resident company is not included in that company's CT profits. Similarly, such a distribution received by a non-UK resident company trading through a UK branch is not included in the CT profits of that branch.
- A distribution by a non-resident company trading in the UK through a branch or agency is not deductible in computing its CT profits. No ACT is due on the distribution.
For distributions made on or after 6 April 1999
- If a person other than another UK resident company receives the distribution, then it is for tax purposes income chargeable to IT under Schedule F on that person. If the distribution is a qualifying distribution (see below) the amount of the income is the amount of the distribution plus the tax credit.
The tax credit fraction is one-ninth.
If the distribution is a non-qualifying distribution see CTM15950 for the tax treatment in respect of companies and AP3076 for individuals.
A distribution chargeable under Schedule F is not chargeable under any other provisions of the Income Tax Acts.
- A distribution paid by a company is not deductible in computing its CT profits. A distribution made by a UK resident company and received by a UK resident company is not included in the recipient company's CT profits. Similarly, such a distribution received by a non-UK resident company trading through a UK permanent establishment is not included in the CT profits of that permanent establishment.
- A distribution by a non-resident company trading in the UK through a permanent establishment or agency is not deductible in computing its CT profits.
A qualifying distribution is any distribution within ICTA88/S209 and ICTA88/S418 (CTM15000 onwards and CTM60500 onwards) except the following distributions which are non-qualifying distributions.
- A distribution of certain bonus redeemable share capital and bonus securities which in relation to the company making it is a distribution by virtue only of ICTA88/S209 (2)(c) (see CTM15450 and CTM20075).
- Company A may make a distribution of bonus share capital or securities directly or indirectly to Company B. This may be a distribution by virtue only of ICTA88/S209 (2)(c). If Company B later distributes that same share capital or securities this later distribution is also a non-qualifying distribution.
- The amount of the non-qualifying distribution for the purposes of ICTA88/S209 (2)(c) is:
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- for redeemable share capital, the excess of the nominal amount of the share capital together with any premium payable on redemption or in a winding-up or in any other circumstances over any new consideration received,
- for any security, the excess of the principal amount secured including any premium payable at maturity or in a winding-up or in any other circumstances over any new consideration received.
