Corporation Tax Act 2010 section 1089

Meaning of "chargeable payment": unquoted companies

Section 1089 defines when a payment connected with an exempt distribution involving an unquoted company becomes a "chargeable payment", by setting out three conditions that must all be met.

• The section applies where an unquoted company is involved in an exempt distribution and a payment is made under a scheme or arrangement with that company, or with its main participators if the company is controlled by five or fewer persons
• The payment must be connected with shares in the paying company, shares in any company involved in the exempt distribution, or any transaction affecting those shares (Condition B1)
• The payment must either lack genuine commercial reasons or form part of a tax avoidance scheme (Condition C1), and if made by a company, must not be a distribution, an exempt distribution, or a payment to a fellow group company (Condition D1)
• An unquoted company is excepted from the main participator rule if it is controlled solely by another company which is itself not controlled by five or fewer persons