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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Depreciatory intra-group dividends: identification of chargeable profits

TCGA92/S31 (10)

If a company has distributable profits which are made up partly of chargeable profits and partly of other profits which are not chargeable, any distribution is identified first with non-chargeable profits. This order of priority rule is in TCGA92/S31 (10).


A company has distributable profits £500,000 which arose from normal trading operations. These are non-chargeable profits. In addition the company has chargeable profits £600,000. It makes a distribution £750,000 and is then sold by its parent.

The distribution is identified first with the non-chargeable profits £500,000, and the remainder £250,000 is identified with the chargeable profits. The value shifting provisions permit an addition £250,000 to the consideration for the disposal.

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+.