CTM15300 - Distributions: general: disapplication of the distribution provisions

ICTA88/S209 (5) & (6)

Each disapply the distributions provisions, but in very different circumstances.

ICTA88/S209 (5) says that ICTA88/S209 (4) does not apply where:

• the company and the member receiving the benefit of the transaction are both UK resident companies which are bodies corporate and either,
• the company giving the benefit is a subsidiary of the recipient, or
• both companies are subsidiaries of a third UK resident company.

Any amount that would be a distribution but for ICTA88/S209 (5) cannot be a distribution under ICTA88/S209 (2) (b).

In the Noved case (SC3081/2005) the Special Commissioners noted that Section 209 (5) contemplates an overlap between subsections (2) (b) and (4).

ICTA88/S209 (6) prevents certain transactions being distributions under either ICTA88/S209 (2)(b) or (4). It applies to transfers of assets (other than cash), or of liabilities, between companies where

• both are UK residents, neither of which is a 51% subsidiary (ICTA88/S838 (1)) of a non-UK resident company,

• the two companies are not under common control (ICTA88/S416), either at the time of the transfer or as a result of it.