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HMRC internal manual

Company Taxation Manual

Particular topics: dividend-stripping: repeal of ICT88/S736

 ICTA88/S736 denied a dealing company an allowance for any fall in value below acquisition value of a holding in another UK resident company where that fall in value was attributable to a distribution or distributions made after 29 April 1969 in respect of that holding.  The receipt of the distribution adequately compensated the dealer for the fall in value, and no tax relief was justified.

However, when the provision was introduced in 1960, a dealer in securities was not charged to tax on dividends and could claim any loss on dealing in securities which paid a dividend against (income) tax suffered, or treated as suffered, on the dividend and reclaim it.  Shortly after the legislation was introduced the House of Lords held, in a number of cases, that this dividend stripping technique did not work (see, for example, Thomson v Gurneville Securities Ltd (1971) 47TC633).  And a dealer in securities became from 1997 liable to tax on dividends received as trading income (F(2)A97/S24).

ICTA88/S736 was repealed by FA08/S66 (1)(d).

Archive guidance paragraphs CTM36710 to CTM36790 are available on request from CTIS (Technical).