Corporation Tax Act 2010

Transfers of assets or liabilities treated as distributions

1020Transfers of assets or liabilities treated as distributions

(1)This section applies if on a transfer of assets or liabilities—

(a)by a company to its members, or

(b)to a company by its members,

the amount or value of the benefit received by a member exceeds the amount or value of any new consideration given by the member.

(2)The company is treated for the purposes of the Corporation Tax Acts as making a distribution to the member of an amount equal to the excess.

But this is subject to section 1021.

(3)For the purposes of subsection (1) the amount or value of a benefit, or of any consideration, is determined in accordance with the market value.

1021Section 1020: exceptions

(1)Section 1020 does not apply if—

(a)the company and the member receiving the benefit are both UK resident, and

(b)either—

(i)the company is a 51% subsidiary of the member, or

(ii)both are 51% subsidiaries of a third company which is also UK resident.

(2)In determining whether one body corporate is a 51% subsidiary of another body corporate (“A”) for the purposes of subsection (1), A is treated as not being the owner of—

(a)any share capital which it owns directly in a body corporate as trading stock,

(b)any share capital which it owns indirectly, and which is owned directly by a body corporate as trading stock, or

(c)any share capital which it owns directly or indirectly in a body corporate which is not UK resident.

(3)For the purposes of subsection (2) share capital owned by a body corporate is owned as trading stock if (and only if) a profit on the sale of the shares would be treated as a trading receipt of the body’s trade.

(4)No transfer of assets (other than cash) or of liabilities between one company and another constitutes, or is treated as giving rise to, a distribution by virtue of section 1020 if—

(a)both the companies are UK resident,

(b)neither of them is a 51% subsidiary of a non-UK resident company, and

(c)they are not under common control, either at the time of the transfer or as a result of it.

(5)In this section—

• “under common control” means under the control of the same person or persons, and

• “control” has the same meaning as in Part 10 (see sections 450 and 451).