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Finance Act 1965

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8(1)This paragraph applies where a person who is connected with a company resident in the United Kingdom receives or becomes entitled to receive in respect of shares in the company any capital distribution from the company, other than a capital distribution representing a reduction of capital, and—

(a)the capital so distributed derives from the disposal of assets in respect of which a chargeable gain accrues to the company; or

(b)the distribution constitutes such a disposal of assets.

(2)If the corporation tax assessed on the company for the accounting period in which the chargeable gain accrues included any amount in respect of chargeable gains, and any of the tax assessed on the company for that period is not paid within six months from the date when it becomes payable by the company, the said person may by an assessment made within two years from that date be assessed and charged (in the name of the company) to an amount of that corporation tax—

(a)not exceeding the amount or value of the capital distribution which that person has received or become entitled to receive; and

(b)not exceeding a proportion equal to that person's share of the capital distribution made by the company of corporation tax on the amount of that gain at the rate in force when the gain accrued.

(3)A person paying any amount of tax under this paragraph shall be entitled to recover a sum equal to that amount from the company.

(4)The provisions of this paragraph are without prejudice to any liability of the person receiving or becoming entitled to receive the capital distribution in respect of a chargeable gain accruing to him by reference to the capital distribution as constituting a disposal of an interest in shares in the company.

(5)In this paragraph " capital distribution " has the same meaning as in paragraph 3 of Schedule 7 to this Act, and " connected with " shall be construed in accordance with paragraph 21 of that Schedule.

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