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HMRC internal manual

Company Taxation Manual

Groups & consortia: groups - entitlement to profits or assets available for distribution: effect of limitation of rights

ICTA88/SCH18/PARA4

This page applies in any case where an equity holder holds shares or securities with limited rights (CTM81060). The guidance is expressed in terms of the profit distribution test (CTM81045), but the same principles apply for the asset distribution test (CTM81050).

In such a case, the percentage of the profits available for distribution to equity holders to which the parent company is beneficially entitled is the lower of the following two figures:

  • the percentage of the profits available for distribution to equity holders to which the parent company is beneficially entitled taking into account the limited rights, and
  • the percentage of those profits to which the parent company would be beneficially entitled, if the limited rights of every equity holder referred to in CTM81060 (including the parent company if it is such an equity holder) were waived.

There is an example of the effect of shares with limited rights on entitlement to group relief at (CTM81122).

Where the equity holder holds shares or securities with limited rights and shares with varying rights the guidance in CTM81070 to CTM81085 applies.