Income Tax Act 2007

693 Abnormal dividends: the excessive return condition

(1) The excessive return condition is that the dividend substantially exceeds a normal return on the consideration provided by the recipient for the relevant securities.

(2) In this section “the relevant securities” means–

(a) the securities in respect of which the dividend was received, and

(b) if those securities are derived from securities previously acquired by the recipient, the securities which were previously acquired.

(3) In determining whether an amount received by way of dividend exceeds a normal return, regard must be had—

(a) to the length of time before its receipt that the recipient first acquired any of the relevant securities, and

(b) to any dividends paid and other distributions made in respect of them during that time.

(4) If—

(a) the consideration provided by the recipient for any of the relevant securities exceeded their market value at the time the recipient acquired them, or

(b) no consideration was so provided,

for the purposes of subsection (1) consideration equal to that market value is taken to have been so provided.