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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Close companies: extended meaning of distribution: benefits for exempt or lower tax rate participators

Exceptionally the provision of benefits in kind, the payment of excessive pensions, etc, or the making of gifts by a close company may be a means of transferring income from high tax rate participators to exempt or low rate participators. Where such benefits, etc, are provided for a participator or associate who is exempt, or liable at IT rates substantially below those of other material participators the following apply.

  • As regards benefits in kind provided for dependants or the family of a director, see SE20504. Such benefits may be assessable on the director concerned rather than on the low rate recipient.
  • For distributions made before 6 April 1999, the provisions of ICTA88/S231 (3A) to (3D) may apply.