Corporation Tax Act 2009 section 931G

Distributions in respect of portfolio holdings

Section 931G provides that dividends and other distributions received from portfolio holdings — that is, small shareholdings of less than 10% — fall into an exempt class for corporation tax purposes.

• A distribution is exempt where the recipient holds less than 10% of the payer's issued share capital, is entitled to less than 10% of distributable profits, and would receive less than 10% of assets on a winding up
• All three of the 10% tests — share capital, income rights and capital rights — must be satisfied for the exemption to apply
• Where the payer has more than one class of share, the 10% thresholds are measured against the issued share capital of the same class as the share on which the distribution is made
• Shares are not treated as being of the same class if the amounts paid up on them differ, ignoring any amounts paid by way of share premium