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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Particular topics: dividend-stripping: enquiries to dealing company

Unlike the earlier dividend-stripping codes, ICTA88/S736 contains no precise rules for determining the amount of the adjustment, since the latter depends upon the reduction in value being ‘material’, and the reduction will itself in many cases be a matter of estimation (see CTM36720). A general enquiry as to whether any adjustment requires to be made under Section 736 is therefore unlikely to be of value. It is up to the Inspector to look at the dealing account and the dividends received since acquisition of the holding, and form his own opinion as to whether there is prima facie evidence that Section 736 applies. Further enquiries should then be framed to suit the circumstances of the case. It is not the intention that Inspectors should spend a great deal of time on the odd fortuitous transaction but where there is any evidence of a scheme of, or persistence in, stripping operations, Section 736 should be applied as far as appropriate.