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HMRC internal manual

Capital Gains Manual

Small capital distributions: Disposal proceeds more than allowable companies

TCGA92/S122 (4)It is possible that the value of the small capital distribution may be greater than the allowable expenditure. In this case TCGA92/S122 (2) does not apply. However, the taxpayer can make an election under TCGA92/S122 (4) to reduce the capital distribution by the amount of the allowable expenditure. This allowable expenditure is then no longer available to set off against any later disposal of the shares. Although there is no explicit reference to small capital distributions in Section 122(4) the election can only be made if the distribution is small. This was confirmed by the Court of Appeal in the case of O’Rourke v Binks 65TC165.