Taxation of Chargeable Gains Act 1992 section 189

Capital distribution of chargeable gains: recovery of tax from shareholder

Section 189 allows HMRC to recover unpaid corporation tax on chargeable gains from a shareholder who is connected with the company and has received a capital distribution funded by or constituting those gains.

• Where a UK-resident company fails to pay corporation tax on chargeable gains within six months of the relevant date, HMRC can assess a connected shareholder who received a capital distribution derived from those gains
• The tax charged on the shareholder cannot exceed the lower of the value of the distribution they received and their proportionate share of the corporation tax on the gain
• A shareholder who pays tax under this provision can recover the amount paid, plus any interest, from the company
• This recovery mechanism does not affect any separate capital gains tax liability the shareholder may have on the distribution itself as a disposal of their interest in shares