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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Groups & consortia: groups - entitlement to profits or assets available for distribution: varying rights for different accounting periods - effect

ICTA88/SCH18/PARA5

This page applies in any case where an equity holder holds shares or securities whose rights to dividend or interest vary for different accounting periods (CTM81070).

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 percentages:

  • the percentage of those profits to which the parent company is beneficially entitled in the relevant accounting period (CTM81005), and
  • the percentage of the profits to which the parent company would be beneficially entitled in any later accounting period in which the rights attaching to any shares or securities had changed.

There is an example at CTM81123.

If an equity holder holds shares or securities with varying rights, and in addition, shares or securities with limited rights (CTM81060 to CTM81065), then the guidance in CTM81080 applies.

If an equity holder holds shares or securities:

  • with varying rights, and
  • subject to option arrangements (CTM81090 to CTM81100),

then the guidance in CTM81105 applies.