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HMRC internal manual

International Manual

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HM Revenue & Customs
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Distribution exemption: Anti-avoidance legislation: manipulation of portfolio holdings rule

CTA09/S931L: Schemes involving manipulation of portfolio holdings rule

A distribution falls within an exempt class under CTA09/S931G provided that it is paid in respect of a share and the recipient of the distribution holds less than 10% of that class of share. This creates a risk that schemes might be set up to disperse a shareholding equal to or in excess of 10% between connected companies in order to obtain exemption under S931G.

CTA09/S931L is relevant only in those cases where a distribution is exempt solely by reason of S931G. If it is exempt under any other class, S931L will not prevent the distribution from falling into that other class and so will not prevent it from being exempt.

S931L applies only if two conditions are met:

  • There must be a scheme that has as its main purpose, or one of its main purposes, to obtain exemption under S931G.
  • If the shareholding of the recipient was aggregated with the shareholdings of all connected companies, the distribution would not be exempt by virtue of S931G

Where it applies, the effect of S931L is to prevent a distribution from being exempt by virtue of S931G.

“Relevant person” in this section refers to the recipient of the distribution and any connected person (INTM651040).