Extraction of funds from non-UK company: capital or income?

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Jackie Wheaton

Question

My client is a life tenant of a trust. The trustees hold 100% of the shares of a BVI company which has recently sold a major part of its business and now wishes to repurchase its own shares. The question has arisen as to whether the funds extracted would be income or capital for UK tax purposes.

Answer

From a corporate tax perspective the position is now governed entirely by legislation.

As a result of changes made in the F(No. 3)A 2010 a company in receipt of a distribution is in most circumstances able to benefit from the corporate dividend exemption regardless of whether the distribution received is capital or income in nature (this would not apply to a small company receiving a dividend from a BVI company because of the absence of a suitable tax...

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© Copyright LexisNexis 2024. All rights reserved.

Question

My client is a life tenant of a trust. The trustees hold 100% of the shares of a BVI company which has recently sold a major part of its business and now wishes to repurchase its own shares. The question has arisen as to whether the funds extracted would be income or capital for UK tax purposes.

Answer

From a corporate tax perspective the position is now governed entirely by legislation.

As a result of changes made in the F(No. 3)A 2010 a company in receipt of a distribution is in most circumstances able to benefit from the corporate dividend exemption regardless of whether the distribution received is capital or income in nature (this would not apply to a small company receiving a dividend from a BVI company because of the absence of a suitable tax...

If you or your firm subscribes to Taxjournal.com, please click the login box below:

If you do not subscribe but are a registered user, please enter your details in the following boxes:

Subscribe Now...

Alternatively, you can register free of charge to read a limited amount of subscriber content per month.

Once you have registered, you will receive an email directing you back to read this article in full.

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