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Taxation of Chargeable Gains Act 1992

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189Capital distribution of chargeable gains: recovery of tax from shareholder

(1)This section 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 accrued to the company; or

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

and that person is referred to below as “the shareholder”.

(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 6 months from the date determined under subsection (3) below, the shareholder may by an assessment made within 2 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 the shareholder has received or become entitled to receive; and

(b)not exceeding a proportion equal to the shareholder’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)The date referred to in subsection (2) above is whichever is the later of—

(a)the date when the tax becomes due and payable by the company; and

(b)the date when the assessment was made on the company.

(4)Where the shareholder pays any amount of tax under this section, he shall be entitled to recover from the company a sum equal to that amount together with any interest paid by him under section 87A of the Management Act on that amount.

(5)The provisions of this section are without prejudice to any liability of the shareholder 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.

(6)With respect to chargeable gains accruing in accounting periods ending on or before such day as the Treasury may be order appoint this section shall have effect—

(a)with the substitution for the words in subsection (3) after “above” of the words “is the date when the tax becomes payable by the company”; and

(b)with the omission of the words in subsection (4) from “together” to the end of the subsection.

(7)In this section “capital distribution” has the same meaning as in section 122.

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