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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: entitlement different - effect

ICTA88/SCH18/PARA5 (3) applies where, in the relevant accounting period (CTM81005),

  • an equity holder holds, as such (CTM81010), any shares or securities, and
  • certain arrangements exist in respect of those shares or securities.

These arrangements are confined to those that could vary the rights attaching to shares or securities. Following J Sainsbury Plc v O’Connor 64TC208 they do not include arrangements that could affect the ownership of shares.

The arrangements within paragraph 5 (3) are those as a result of which an equity holder’s entitlement to profits or to assets in a winding-up could be different in the accounting period, or in any later accounting period, compared with what the entitlement would be if the arrangements did not come into effect.

Under paragraph 5 (3) it is assumed that the effect would be given to the arrangements. The shares or securities are then treated as though any variation in the equity holder’s entitlement to profits or to assets in a winding-up was the result of the operation of varying rights (CTM81070 to CTM81080).