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HMRC internal manual

Company Taxation Manual

Particular topics: dividend-stripping: distributions: abnormal return: restrictions

ICTA88/S237 applies to any person receiving a payment treated as a distribution by virtue of:

  1. ICTA88/S209 (3) - repayment of a security in excess of the consideration provided for the issue of that security,
  2. ICTA88/S210 - a repayment of share capital followed by a bonus issue,


  1. 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.