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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Recovery of CT from shareholders: general


The effect of Section 189 is to enable the Revenue to recover from a shareholder connected with a company (referred to below as `the shareholder’) Corporation Tax not paid by the company in respect of chargeable gains where either

  • the shareholder received a capital distribution from the proceeds of the disposal that gave rise to the chargeable gain


  • the assets on which the gain arises were disposed of by way of a capital distribution to the shareholder.

In these circumstances, the shareholder is liable for the unpaid Corporation Tax whether he or she receives or becomes entitled to receive a capital distribution in respect of shares in the company.

`Capital distribution’ for these purposes means any distribution from a company, including one made in the course of dissolution or winding up, in money or money’s worth which does not constitute income in the recipient’s hands for the purposes of Income Tax. It does not include a capital distribution which represents a reduction of capital.

See CG66500+ concerning the recovery of tax where assets are transferred at undervalue.