CTM16100 | Distributions: impact on Corporation Tax: receipt by UK resident company

A distribution from a UK resident company is income in the hands of an individual who receives it. See SAIM5020 for the treatment of a distribution in the hands of an individual beneficially entitled to it.

A UK resident company is not chargeable to Income Tax or Corporation Tax in respect of any distribution received from another UK resident company. The rule formerly at ICTA88/S208 was briefly re-enacted as CTA09/S1285. Following the enactment of CTA09/PART9A by FA09/SCH14, the treatment of distributions in the hands of a UK resident company does not distinguish between origin in a UK resident or non-UK resident company. Exemption applies to both, but subject to certain exceptions - see INTM651000 onwards.

Where the distribution is a qualifying distribution, other than a foreign income dividend (FID -see CTM20070), the distribution plus the tax credit is franked investment income of the recipient company, see CTM16120.

Where the qualifying distribution:

• is a dividend, and

• has been paid before 6 April 1999, under an ICTA88/S247 election without the paying company accounting for ACT,

the distribution is 'group income' of the receiving company, see CTM80070.

When before 6 April 1999 the qualifying distribution received was a foreign income dividend, the FID received could frank FIDs paid. See CTM21250.

A non-qualifying distribution, see CTM15900 onwards, is neither income nor franked investment income in the hands of the receiving company.

Where the recipient is a non-UK resident company, see CTM34270.