Particular topics: dividend-stripping: distributions: abnormal return: restrictions
ICTA88/S237 applies to any person receiving a payment treated as a distribution by virtue of:
- ICTA88/S209 (3) - repayment of a security in excess of the consideration provided for the issue of that security,
- ICTA88/S210 - a repayment of share capital followed by a bonus issue,
- ICTA88/S211 - a bonus issue followed by a repayment of share capital.
and the return represented by the distribution (referred to in ICTA88/S237 as a ‘bonus issue’) is greater than a ‘normal return’ on the consideration provided by the recipient for the shares or securities in respect of which the distribution is made.
The effect of ICTA88/S237 is that to the extent that the distribution exceeds a normal return, that part of the distribution and its associated tax credit:
i) cannot be taken into account for the purpose of any claim to loss relief,
ii) does not constitute franked investment income for the purpose of ICTA88/S241 or ICTA88/S244,
iii) is not available to cover charges or for interest relief.