Section 396A | Arrangements offering a choice of capital or income return

(1)Subsection (2) applies if a person (“S”) has a choice either—

(a)to receive what would (ignoring this section) be a distribution of a company, or

(b)to receive from that company, or from a third party, anything else (“the alternative receipt”) which—

(i)is of the same or substantially the same value, and

(ii)(ignoring this section) would not be charged to income tax.

(2)If S chooses the alternative receipt—

(a)for income tax purposes it is treated as a distribution made to S by that company in the tax year in which it is received by S, and

(b)for the purposes of sections 1100 to 1103 of CTA 2010 (statements and returns of details of distributions) it is treated as a distribution that—

(i)is so made, and

(ii)is one to which section 1100 of CTA 2010 applies.

(3)For the purposes of this section—

(a)it does not matter if the choice mentioned in subsection (1) is subject to any conditions being met or to the exercise of any power;

(b)where S is offered one thing subject to a right, however expressed, to choose another instead, S is to be regarded as making a choice if S abandons or fails to exercise such a right.

(4)If at any time a tax other than income tax (“the other tax”) is charged in relation to the alternative receipt, in order to avoid a double charge to tax in respect of that receipt, a person may make a claim for one or more consequential adjustments to be made in respect of the other tax.

(5)On a claim under subsection (4) an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(6)Consequential adjustments may be made—

(a)in respect of any period,

(b)by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and

(c)despite any time limit imposed by or under an enactment.