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HMRC internal manual

Capital Gains Manual

Depreciatory intra-group dividends: distribution tracing

TCGA92/S31 (3)

Where one company distributes chargeable profits to another company, these become chargeable profits of the company which receives the distribution. It is possible to trace chargeable profits in this way for any number of distributions through any number of tiers of companies. At each stage however TCGA92/S31 (3) identifies a distribution with non-chargeable profits in preference to chargeable profits.


Company A has chargeable profits £300,000 and other profits £250,000. It pays a dividend £400,000 to company B.

The dividend is identified £250,000 with non-chargeable profits and £150,000 with chargeable profits. Company B accordingly has chargeable profits £150,000.

Company B has non-chargeable profits £100,000 apart from the dividend received from company A. It pays a dividend £400,000 to company C.

The dividend is attributed first to company B’s own non-chargeable profits £100,000 and the £250,000 non-chargeable profits received from company A. The element of the dividend paid by company B which represents chargeable profits is £50,000.

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+.