Corporation Tax Act 2010 section 1088

Meaning of "chargeable payment"

Section 1088 defines what constitutes a "chargeable payment" in the context of demergers, by setting out four conditions (A to D) that must all be met, or alternatively by reference to the supplementary rules for unquoted companies in section 1089.

• A payment is chargeable if it is made by a company involved in an exempt distribution, directly or indirectly, to a member of that company or a member of any other company involved in the exempt distribution (Condition A), and is connected with shares in those companies or related transactions (Condition B).
• The payment must either lack genuine commercial reasons or form part of a tax avoidance scheme — defined as an arrangement where a main purpose is the avoidance of tax, including stamp duty and stamp duty land tax (Condition C).
• The payment must not itself be a distribution or an exempt distribution, and must not be made to a company within the same group as the company making it (Condition D).
• A payment may also be a chargeable payment under section 1089, which provides supplementary rules where any company concerned in the exempt distribution is an unquoted company.