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HMRC internal manual

International Manual

Distribution exemption: Anti-avoidance legislation: payments for distributions

CTA09/S931O: Schemes involving payments for distributions

A distribution is not exempt if is paid as part of a tax advantage scheme whereby a tax deduction is obtained, or taxable income is given up in return for the distribution or a right to receive the distribution.

This anti-avoidance rule is an extension of an older rule that restricts deductions for annual payments (CTA09/S1301). Where the section potentially applies by reason of a tax deduction, the same restrictions apply to S931O as apply to annual payments in S1301.

Where it applies, S931O prevents a distribution from falling into any exempt class and so it becomes taxable income.