Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 4

Distributions out of certain exempt profits or gains or out of certain relieved income

Overview

This Chapter provides for the tax treatment of distributions paid out of certain exempt profits/gains. The treatment of such distributions can vary depending on the nature of the profits/gains out of which the distributions are made. For example, sections 140, 141 (up to 23 November 2010) and 142 give an income tax and corporation tax exemption in respect of the distributions to which they apply.

140 Distributions out of profits or gains from stallion fees, stud greyhounds services fees and occupation of certain woodlands

Summary

Dividends and other distributions paid out of exempt profits/gains from stallion fees, greyhound service fees or from the occupation of certain woodlands are, in the hands of an individual, disregarded for income tax purposes and, in the case of companies, treated as exempt income of the company for corporation tax purposes.

Details

Definitions

(1) “exempt profits” are profits/gains which are exempt from tax by virtue of —

  • section 231 (profits/gains arising to the owner or part-owner of a stallion from the sale of services of mares),
  • section 232 (profits/gains from the commercial occupation of woodlands), or
  • section 233 (profits/gains arising to the owner or part-owner of a stud greyhound from the sale of services of greyhound bitches).

“other profits” includes distributions received by a company, but does not include distributions received by a company which have been made out of exempt profits (under subsection (3)(a)(i) such distributions when received by a company are treated as exempt profits of the recipient company).

Distributions

(2) Where a company makes a distribution partly out of exempt profits and partly out of other profits, the distribution is treated as 2 distributions one made out of exempt profits and the other made out of other profits.

(3) Where the recipient of a distribution out of exempt profits is a company, the distribution is deemed for corporation tax purposes to be exempt profits of that company. A distribution out of exempt profits is also disregarded for income tax purposes.

Dividend warrants

(5) Where a company makes a distribution to which this section applies, including part of a distribution treated as a distribution, the dividend warrant must show, in addition to the particulars required to be given apart from this section, that the distribution has been made out of exempt profits.

Attribution to accounting periods

(7) A distribution for an accounting period is regarded as being made, as far as is possible, out of the distributable income of that period, and any excess of the distribution over that income is treated as having been made out of the income of the most recent preceding accounting period in priority to earlier accounting periods.

(9) Where a company makes a distribution which is not expressed to be for any specified period the distribution is treated as having been made for the accounting period in which it is made.

Apportionment

(8) Where a company makes a distribution for a period of account which is not an accounting period for corporation tax purposes and part of the period of account falls within an accounting period, the distribution is apportioned on a time basis to determine the part to be regarded as being for or in respect of the accounting period.

Relevant Date: Finance Act 2019