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


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.


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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