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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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Close companies: extended meaning of distribution: benefits to directors and employees

The extended meaning of distributions should normally be regarded as not applying where the expense is incurred in or in connection with:

  • the provision of benefits, etc, for a person who is a director of the company or is employed by the company in higher paid employment (SE20200 onwards),
  • the provision of living accommodation for any person if the accommodation is (within the meaning of ITEPA2003/S97 (formerly ICTA88/S145) provided by reason of their employment,
  • the provision for the spouse, children or dependants of a person employed by the company of any pension, annuity, lump sum, gratuity or other like benefit to be given on that person’s death or retirement.

The extended meaning of distribution CTM60520 should also, normally, be regarded as not applying to expenses incurred in or in connection with the provision of benefits, etc, for a participator (or an associate of a participator) who is:

  • a director or employee of a company which is a charity, or
  • employed by a company which carries on business as a school (or other educational establishment), or
  • employed in lower paid employment,

unless exceptionally the benefits etc are excessive compared to those which might normally be provided for an individual holding a similar position with a company in which they were not a participator (or an associate of a participator).