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HMRC internal manual

International Manual

HM Revenue & Customs
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Distribution exemption: Exemption for all other companies: series of transactions

Example of a series of transactions

It is not necessary for a transaction itself to reduce UK tax in order for it to fall within the scope of CTA09/S931H(2) (and hence to give rise to profits other than relevant profits). It may instead be part of a series of transactions that achieve the tax reduction.

For example:

  • Company A has profits derived from transactions that achieve a UK tax reduction and that had as a main purpose to achieve the reduction
  • Company A pays a dividend to Company B in respect of a non-redeemable ordinary share
  • Company B pays a dividend to Company C in respect of a preference share.

If the above form a series of transactions, it will follow that Company B’s profits resulting from the dividend paid to it by Company A will not be relevant profits for the purposes of S931H. Consequently the dividend will be taxable unless an exempt class other than S931H applies.