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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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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.

Step 1

Calculate the gain that would have arisen if the non-resident company had been resident in the UK. This is 200,000.

Step 2

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.

Participator Voting rights Distributions  
X 50% 100%  
Y 50% 0%  

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.

Step 3

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

Step 4

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.