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HMRC internal manual

Capital Gains Manual

Non-resident companies: quantifying tax set-off available following capital dividends or distributions

There are rules in section 13(7A) to determine the amount of tax arising on a subsequent distribution which can be relieved.

The rules are set out in CG57375, and also apply where a deduction may be due under section 13(7) on a disposal of the participator’s interest, see CG57370.

Once capital gains tax has been paid under section 13(2), then the whole of that tax is available for set-off against any tax liability on a subsequent distribution where the conditions for relief are met. Should only half of the gain be distributed this does not mean that only half of the section 13 capital gains tax can be set off. The section 13 tax represents a pool of tax credit to be used up against tax liability arising from appropriate distributions in respect of the same gain. Thus if only half of the gain is distributed but the tax liability on the distribution is at a higher rate than the tax on the section 13 gain, the tax credit relief will be more than half of the Section 13 tax.