Taxation of Chargeable Gains Act 1992 section 122

Distribution which is not a new holding within Chapter II

Section 122 deals with how capital distributions received by a shareholder from a company are treated for capital gains tax purposes, including when a small distribution can avoid triggering a disposal and how allowable costs are adjusted.

• A capital distribution received in respect of shares is generally treated as a disposal of an interest in those shares, with the distribution amount being the disposal proceeds
• If the distribution is small compared with the value of the shares (broadly 5% or less, or up to £3,000 if greater), it is not treated as a disposal but instead reduces the allowable cost base of the shares
• Where the allowable cost of the shares is less than the distribution (or nil), the small distribution rule does not apply, but the recipient may elect to reduce the distribution by the allowable cost, which is then permanently lost for future disposals
• A capital distribution includes any distribution in money or money's worth (such as assets or cash from a winding-up, takeover consideration, or share capital reduction) but excludes distributions that are treated as income for income tax or corporation tax purposes