Income and Corporation Taxes Act 1988

Relevant income

1 (1) Subject to the provisions of this Part of this Schedule, the relevant income of a company for an accounting period is—

(a) in the case of a company which is a trading company or a member of a trading group, so much of its distributable income, other than trading income, for that period as can be distributed without prejudice to the requirements of the company’s business;

(b) in the case of a company not within paragraph (a) above whose distributable income for that period consists of or includes estate or trading income—

(i) so much of the estate or trading income as can be distributed without prejudice to the requirements of the company’s business so far as concerned with the activities or assets giving rise to estate or trading income; and

(ii) its distributable income, if any, other than estate or trading income;

(c) in the case of any other company, its distributable income for that period.

(2) In arriving at the relevant income for any accounting period—

(a) where under sub-paragraph (1) above regard is to be had to the requirements of a company’s business, regard shall be had not only to the current requirements of the business but also to such other requirements as may be necessary or advisable for the maintenance and development of that business but, for this purpose, the provisions of paragraph 8 below shall apply;

(b) the amount of the estate or trading income shall be taken as the amount included in respect of it in the distributable income.

(3) In arriving at the relevant income for any accounting period of a company which is a trading company or a member of a trading group, regard shall be had not only to the current requirements of the company’s business and to such requirements as may be necessary or advisable for the maintenance and development of that business as fall within sub-paragraph (2)(a) above, but also to any other requirements necessary or advisable for the acquisition of a trade or of a controlling interest in a trading company or in a company which is a member of a trading group by virtue of paragraph 7(2)(a) below; but, for this purpose, paragraph 9 below shall apply.

(4) For the purposes of sub-paragraph (3) above, the acquisition of a controlling interest in a company means the acquisition, whether on a single occasion or otherwise, of such ordinary share capital of that company as enables the acquiring company to exercise the greater part of the voting power in that company.

(5) For the purposes of sub-paragraph (3) above, the requirements of a company’s business which are necessary or advisable for such an acquisition as is mentioned in that sub-paragraph include such requirements as are necessary or advisable for—

(a) the redemption or repayment of any share or loan capital or debt (including any premium thereon) issued or incurred in or towards payment for that acquisition, or issued or incurred for the purpose of raising money to be applied in or towards payment therefor, or

(b) meeting any obligation of the company in respect of that acquisition,

so far as any sum so expended or applied, or intended to be expended or applied, does not fall to be treated for the purposes of this Chapter as a distribution by the company.