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Non-resident companies: examples of relief under TCGA92/S13(5A) on a distribution to participators
This example illustrates the operation of TCGA92/S13(5A) if the company realises a gain and distributes an amount in respect of the gain to participators.
Facts
- A UK resident shareholder owns half the shares in a non-resident close company. The company structure is straightforward and the UK resident is a 50% participator. The shareholder does not claim the remittance basis.
- In January 2009 the non-resident company sells an asset realising a gain of £100,000.
- The UK resident has no other gains in 2008-09 but is chargeable to Capital Gains Tax at 18%.
- In June 2009 the company makes a distribution of £100,000 to its shareholders. The UK resident is chargeable at 40% on the amount received.
Capital Gains Tax treatment
January 2009 - The ordinary rules of TCGA92/S13 apply. Half the gain of £100,000 is attributable to the shareholder and is chargeable to Capital Gains Tax in 2008-09. The tax due is
| Section 13 gain | £50,000 | ||
| less | annual exempt amount | £ 9,600 | |
| £40,400 | |||
| CGT @ 18% | £ 7,272 |
June 2009 - The tax paid under section 13(2) is available for set off. The Income Tax due on the distribution for 2009-10 is
| Distribution | £50,000 | ||
| IT @ 40% | £20,000 | ||
| less | Section 13 tax | £ 7,272 | |
| Tax due | £12,728 |