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HMRC internal manual

Capital Gains Manual

Depreciatory intra-group dividends: drain out dividend scheme

Section 31 counters the drain out dividend scheme by defining a class of profits, which arise from transactions caught by the legislation. If a particular dividend can be identified only with chargeable profits, the dividend may be added to the sale proceeds in computing the consideration received on the disposal of the subsidiary.

Finance Act 2011 introduced a new Targeted Anti-Avoidance Rule for disposals of shares and securities by companies on or after 19 July 2011. See CG48500+.