Non-resident companies: computation of TCGA92/S13 charge: example 4
- a non-resident company has issued share capital of 100 A shares and 100 B shares
- both classes of shares carry equal voting rights but the B shares carry no entitlement to dividends or distributions in a winding-up
- the A shares are owned by X who is resident in the UK
- the B shares are owned by Y who has never been resident in the UK
- the non-resident company realises a gain of 200,000.
Capital Gains Tax computations
You compute the TCGA92/S13 charge as follows.
Calculate the gain that would have arisen if the non-resident company had been resident in the UK. This is 200,000.
Determine the interests of all participators, including any who are not resident in the UK, by applying the tests of participation appropriate to the circumstances.
X is a 50% participator by reference to voting rights attached to the shareholding in A shares.
Y is a 50% participator by reference to voting rights attached to the shareholding in B shares.
X is a 100% participator by reference to rights to dividends and distributions attached to the shareholding in A shares.
Calculate the proportion of the gain apportionable to the interests of each participator.
X (rights to income and capital)
200,000 x 100% = 200,000
Y (voting rights)
200,000 x 50% = 100,000
Consider whether the gains calculated in Step 3 represent a just and reasonable apportionment. In this case the apportionment is not just and reasonable as the total of the gains under the initial apportionment exceeds the actual gain. A full review of all of the circumstances would be necessary. It appears that the true economic interest in the non- resident company is held solely by X. Y’s entitlement should be ignored, and the whole of the gain apportioned to X.