Corporation Tax Act 2010 section 165

Proportion of profits available for distribution to which company is entitled

Section 165 sets out how to determine the proportion of distributable profits that a parent company (Company A) is entitled to receive from a subsidiary (Company B), based on a hypothetical distribution to equity holders.

• The proportion is based on what Company A would receive if all of Company B's total profits for the relevant accounting period were distributed in cash to its equity holders; if there are no profits, a notional figure of £100 is used instead.
• It does not matter whether Company B's profits are actually distributed — the calculation always assumes the entire profits are distributed.
• If Company B is non-UK resident, its total profits must still be calculated as though it were UK resident, applying UK tax rules.
• Repayments of share capital or loan principal are ignored unless they count as distributions, but any payment an equity holder receives in that capacity is included even if it would not normally be treated as a distribution.