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Finance Act 2009

Chapter 4 of Part 9A CTA 2009

51.Chapter 4 interprets terms used in Part 9A and also establishes how Part 9A interacts with certain other parts of CTA.

52.Section 931R allows a company to make an election that a particular distribution that would otherwise be an exempt distribution shall instead be taxable. Two reasons why a company might wish to make such an election are as follows:

  • dividends can only be taken into account for the purposes of the CFC acceptable distribution policy (ADP) exemption if they are subject to tax; and

  • it is possible that exemption could lead to an increased rate of withholding tax.

53.A company may elect for one or more dividends paid in an accounting period not to be exempt. If part but not all of a dividend is an ADP dividend, the company may elect for only the ADP part to be taxable, while retaining exemption for the other part. Any such election must be made within two years of the end of the accounting period in which the distribution is received.

54.Section 931S gives the definition of “small company”, thereby establishing the scope of Chapter 2. The definition follows the 2003 European Commission recommendation except that certain financial companies listed in subsection (2) are not treated as small companies.

55.Section 931T defines the terms “payer” and “recipient” in relation to a distribution. These terms are used throughout Part 9A. It also defines the term “relevant person”, which is used in several of the anti-avoidance sections as a means of referring to any company connected with the recipient of a distribution.

56.Section 931U defines “ordinary share” and “redeemable” for the purposes of sections 931F and 931K. An ordinary share carries no preferential rights and a share is redeemable if as a result of its terms of issue or any collateral arrangements either the holder or the issuer is entitled to redeem the share.

57.Section 931V defines “scheme” and “tax advantage scheme”. The term “scheme” is broadly defined. A scheme is a tax advantage scheme if one of its main purposes is to obtain a tax advantage, as that term is defined in ICTA.

58.Section 931W gives priority to other Parts of CTA that in some cases include distributions under alternative heads of charge (trade profits, property income and life insurance taxation). Hence Part 9A will apply only where distributions are not taxed under these alternative heads of charge.

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