Section 551: Tax consequences of distribution to holder of excessive rights
1738.This section sets out the tax consequences of a distribution made to a “holder of excessive rights” (defined in section 553) if the distributing company has not taken steps to prevent it. It is based on section 114 of, and paragraph 13 of Schedule 17 to, FA 2006.
1739.This section enacts regulation 10 of SI 2006/2864. See Change 43 in Annex 1.
1740.Subsections (1)to (3) provide that when a distribution is made to a holder of excessive rights and the distributing company has not taken reasonable steps to prevent its being made, the distributing company is treated as receiving an amount of income calculated in accordance with section 552.
1741.Subsections (4)to (6) provide that the amount is charged to corporation tax as if it were profits of residual business of the distributing company. This means that the rate of tax is the main rate of corporation tax as mentioned in section 534(3).
