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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Distributions: general: explanation of terms

Below are explanations of some terms used in the distributions legislation.

### Term ### Explanation
Share (CTA10/S1117(1)) Share includes stock and any other interest of a member in a company. It includes the rights of a member in a company limited by guarantee.
Out of assets (CTA10/S1117(3),(4)) A distribution is treated as made, or consideration as provided, out of the assets of a company if the cost falls on the company.
New consideration See CTM15140.
Repayment of capital (CTA10/S1026) See CTM15400 
Principal secured See CTM15501 
Security (CTA10/S1117(1)) This includes a security not creating or providing evidence of a charge on assets.
Interest or other consideration may be paid by a company on money advanced without the issue of a security. In such cases, the interest or other consideration is treated as if paid in respect of a security issued for the advance by the company. As a result, interest on any loan is potentially within the scope of CTA10/S1000(1) E, and F    
  In respect of shares (CTA10/S1113) In places the distributions legislation refers to something done ‘in respect of’ a share. This means something done to a person as the holder or former holder of a share. It also includes something done as a result of a right granted or offer made in respect of the share.

In appropriate cases CTA10/S1113 can apply to something done at the request or wishes of the shareholder (see CTM15350).

When a company is a member of a 90 per cent group, ‘in respect of shares in the company’ means in respect of shares in that company or in any other company in the group.

A transaction may lead to two companies becoming, for the first time, members of the same 90 per cent group.

In these circumstances the companies are not treated as members of the same 90 per cent group for the purposes of deciding if a distribution arose as a result of the transaction.

CTA10/S1113 (2) provides that CTA10/S1113 (1)) does not require a company to be treated as making a distribution to any other UK resident group company.    
  Treatment of share premium (CTA10/S1025 and CTA10/S1115) CTA10/S1115and CTA10/S1025 are concerned with share capital issued at a premium.

CTA10/S1115 (CTM15140) deals with the relationship between a share premium and a new consideration.

CTA10/S1025 deals with the relationship between a share premium and a repayment of share capital. Where share capital is issued at a premium representing new consideration, the legislation treats the premium as part of the share capital in deciding whether a distribution later made in respect of shares is treated as a repayment of share capital.

The effect of CTA10/S1115 (2) and (3) is to ensure that a share premium cannot be used under CTA10/S1115 (3) if it has already been used under CTA10/S1025

CTA10/S1025 (3) similarly ensures that a share premium cannot be used under CTA10/S1025 (2) if it has already been used under CTA10/S1115 (3).