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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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ACT: General: Qualifying and non-qualifying distributions

A qualifying distribution is any distribution within ICTA88/S209 and ICTA88/S418 (CTM15000 onwards and CTM60500 onwards).

However, the following are non-qualifying distributions.

  1. A distribution of certain bonus redeemable share capital and bonus securities, which in relation to the company making it is a distribution by virtue only of ICTA88/S209 (2)(c) (see CTM15450 and CTM20075).
  2. Company A may make a distribution of bonus share capital or securities directly or indirectly to Company B. This may be a distribution by virtue only of ICTA88/S209 (2)(c). If Company B later distributes that same share capital or securities this later distribution is also a non-qualifying distribution.

The amount of the distribution for the purposes of ICTA88/S209 (2)(c) is:

  • for redeemable share capital, the excess of the nominal amount of the share capital together with any premium payable on redemption or in a winding-up or in any other circumstances over any new consideration received,
  • for any security, the excess of the principal amount secured including any premium payable at maturity or in a winding-up or in any other circumstances over any new consideration received.

As regards the treatment of qualifying and non-qualifying distributions:

  • received by companies resident in the UK, see CTM16100 to CTM16130 and CTM15950;
  • received by individuals, see SAIM5050 and, for Foreign Income Dividends (FID), CTM21160;
  • received by non-resident companies, see CTM34270.