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HMRC internal manual

International Manual

Distribution exemption: Exemption for all other companies: portfolio holdings

CTA09/S931G: distributions in respect of portfolio holdings

A distribution falls into an exempt class if it is paid in respect of shares of a particular class where the shares held constitute less than 10% of the total issued shares for that class of share. The portfolio holdings exempt class. This provision therefore extends exemption to a holding of preference or redeemable shares provided that the holding is below 10%.

The 10% condition must be satisfied by reference to income and capital rights as well as by reference to the proportion of share capital subscribed.

A share is not of the same class as another if the amount paid up on each of them is different.

See INTM654050 below regarding an anti-avoidance rule that may apply where a shareholding equal to or in excess of 10% has been divided between connected companies in order to obtain exemption under this class.