HMRC has set out its view on aspects of the tax treatment of payments received by companies in the UK in respect of shares held in foreign companies. The effect of CTA 2009 Part 9A is that to ensure that in most cases distributions received by UK companies are exempt from corporation tax, HMRC said in a guidance note.
‘Distribution’ is defined in CTA 2010 s 1000, and includes any dividend (including a capital dividend) and any other distribution out of the assets of the company made in respect of shares, ‘except to the extent that the distribution represents a repayment of capital on the shares or is equal to any new consideration received by the company’.
HMRC said: ‘Following the judgment of the Court of Appeal in the case of HMRC v First Nationwide [2012] EWCA 278 (reported in Simon’s Tax Cases at [2012] STC 1261), HMRC’s view is that if a dividend payment is a distribution permitted in accordance with the law that governs the foreign company then in the absence of any evidence calling into question the legal form of the payment it will be treated as a dividend for the purposes of s 1000(1)A.’
‘Any other distribution out of assets made in respect of shares will be treated as a distribution under s 1000(1)B, other than on a winding up, unless (or to the extent that) it represents a repayment of capital on the shares, or is equal to any new consideration received by the company.’
The capital on the shares may be less clear for foreign companies than for UK incorporated companies, HMRC said, but ‘HMRC would normally expect to treat as a distribution an amount that is distributable in accordance with the relevant company law, and is not made on winding up or as part of a procedure under the relevant company law for reducing share capital’.
A separate guidance note sets out HMRC’s view on the tax treatment of payments received by individuals and other non-corporates from reserves created following a share capital or share premium reduction.
HMRC has set out its view on aspects of the tax treatment of payments received by companies in the UK in respect of shares held in foreign companies. The effect of CTA 2009 Part 9A is that to ensure that in most cases distributions received by UK companies are exempt from corporation tax, HMRC said in a guidance note.
‘Distribution’ is defined in CTA 2010 s 1000, and includes any dividend (including a capital dividend) and any other distribution out of the assets of the company made in respect of shares, ‘except to the extent that the distribution represents a repayment of capital on the shares or is equal to any new consideration received by the company’.
HMRC said: ‘Following the judgment of the Court of Appeal in the case of HMRC v First Nationwide [2012] EWCA 278 (reported in Simon’s Tax Cases at [2012] STC 1261), HMRC’s view is that if a dividend payment is a distribution permitted in accordance with the law that governs the foreign company then in the absence of any evidence calling into question the legal form of the payment it will be treated as a dividend for the purposes of s 1000(1)A.’
‘Any other distribution out of assets made in respect of shares will be treated as a distribution under s 1000(1)B, other than on a winding up, unless (or to the extent that) it represents a repayment of capital on the shares, or is equal to any new consideration received by the company.’
The capital on the shares may be less clear for foreign companies than for UK incorporated companies, HMRC said, but ‘HMRC would normally expect to treat as a distribution an amount that is distributable in accordance with the relevant company law, and is not made on winding up or as part of a procedure under the relevant company law for reducing share capital’.
A separate guidance note sets out HMRC’s view on the tax treatment of payments received by individuals and other non-corporates from reserves created following a share capital or share premium reduction.
