Section 281 Dividend stripping.C1
United Kingdom
The provisions of this section apply where one company (in this section referred to as “the first company”) has a holding in another company (in this section referred to as “the second company”) and the following conditions are fulfilled—
that the holding amounts to, or is an ingredient in a holding amounting to, 10 per cent. of all holdings of the same class in the second company,
that the first company is not a dealing company in relation to the holding,
that a distribution is or has been made after 29th April 1969 to the first company in respect of the holding, and
that the effect of the distribution is that the value of the holding is or has been materially reduced.
Where this section applies in relation to a holding section 280 above shall apply in relation to any disposal of any shares or securities comprised in the holding, whether the disposal is by the first company or by any other company to which the holding is transferred by a transfer to which section 273 F1or 273A above applies, as if the distribution were a depreciatory transaction and, if the companies concerned are not members of a group of companies, as if they were:
Provided that the distribution shall not be treated as a depreciatory transaction to the extent that it consists of a payment which is required to be or has been brought into account, for the purposes of corporation tax on chargeable gains, in computing a chargeable gain or allowable loss accruing to the person making the ultimate disposal.
This section shall be construed as one with section 280 above.
For the purposes of this section a company is “a dealing company” in relation to a holding if a profit on the sale of the holding would be taken into account in computing the company’s trading profits.
References in this section to a holding in a company refer to a holding of shares or securities by virtue of which the holder may receive distributions made by the company, but so that—
a company’s holdings of different classes in another company shall be treated as separate holdings, and
holdings of shares or securities which differ in the entitlements or obligations they confer or impose shall be regarded as holdings of different classes.
For the purposes of subsection (1) above—
all a company’s holdings of the same class in another company are to be treated as ingredients constituting a single holding, and
a company’s holding of a particular class shall be treated as an ingredient in a holding amounting to 10 per cent. of all holdings of that class if the aggregate of that holding and other holdings of that class held by connected persons amounts to 10 per cent. of all holdings of that class,
and section F2839 of the Taxes Act 1988 (definition of connected persons) shall have effect in relation to paragraph (b) above as if, in subsection (7) of that section, after the words “or exercise control of" in each place where they occur there were inserted the words “or to acquire a holding in".
Annotations
Textual amendments
- F1
Words inserted by Finance Act 1990 (c. 29), s. 70(4) in relation to disposals on or after March 20th 1990.
- F2
Words substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29 para. 32.
Modifications
- C1
Ss. 272-281: definition of "effective 51 percent. subsidiary" applied (E.W.S.) by Ports Act 1991 (c. 52, SIF 58), s. 17(13)
Notes on the whole Act
Textual amendments
- F1
Act repealed (in relation to Tax for the year 1992/93 and subsequent years as mentioned in s. 289 of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 290(3), Sch. 11 para. 24(1), Sch.12 (with savings in ss. 201(3), 290, Sch. 11 paras. 22, 26(2), 27), subject to applications, powers and amendments in the following enactments: Social Security Contributions and Benefits Act 1992 (c. 4), s. 16(1)(3), Sch. 2; Social Security (Consequential Provisions) Act 1992 (c. 6), s. 5, Sch. 3 Pt. II para. 15; Taxation of Chargeable Gains Act 1992 (c. 12), ss. 1(2), 209(3); Finance (No. 2) Act 1992, ss. 24, 49(2)(3)(a)(b)(4)(9), 77, Sch. 6 paras.4, 9, Sch. 17 paras. 6(3)(6), 7; S.I. 1992/58, arts. 9, 11(3),33, Sch. 2 para.1, S.I. 1992/1725, art. 107, Sch. 8 para.2; S.I. 1995/171, reg. 4(2)(a); S.I. 1995/1916, reg. 4; 1994 c. 9, s. 258, Sch. 26 Pt. V
Notes on Part XI
Modifications
- C1
See Income and Corporation Taxes Act 1988 (c. 1, SIF:63:1), ss. 114–116— special rules for partnerships involving companies.
Notes on Chapter I
Modifications
- C1
See Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), ss. 21(2), 59— Pt. XI Ch. 1 to have effect to the exclusion of those sections (persons chargeable under Schs. A and D).