Section 401ZA | Relief: distributions to trustees of employee-ownership trusts

(1)This section applies where—

(a)there has been a disposal of ordinary share capital of a company (“C”) to the trustees of a settlement,

(b)the relief requirements are met in relation to the disposal,

(c)C has made a payment to the trustees that is a distribution to the trustees chargeable to income tax as a result of this Chapter or Chapter 4 (dividends from non-UK resident companies), and

(d)the payment was made for the purposes of meeting the trustees’ acquisition costs.

(2)On the making of a claim, so much of the trustees’ acquisition costs may be deducted from the distribution (whether chargeable under this Chapter or Chapter 4) as—

(a)does not reduce the amount of the distribution below nil, and

(b)has not been deducted from any other distribution.

(3)The “relief requirements” means the requirements set out in section 236H(4) of TCGA 1992 (disposals to employee-ownership trusts), but those requirements have effect for the purposes of this section as if references to “P” were to the person making the disposal whether or not that person is a company.

(4)For the purposes of this section, the trustees’ acquisition costs are sums expended by the trustees on—

(a)the acquisition of ordinary share capital in C by the trustees that resulted from the disposal;

(b)the repayment of any sums borrowed to fund that acquisition;

(c)the payment of interest on any such sums or in respect of any deferral of consideration for the disposal to the extent the payment is not in respect of interest exceeding a reasonable commercial rate;

(d)any valuation of C carried out in connection with the acquisition;

(e)any liability to stamp duty or stamp duty reserve tax on the acquisition;

(f)such other reasonable expenses as are directly connected with the acquisition (but this does not include any expenses incurred in connection with the ownership of the ordinary share capital once acquired).