CTM15350 - Distributions: general: out of assets in respect of shares
Source: gov.uk (2025-07-25)


CTA10/S1000 (1) B applies to any distribution out of the assets of the company in respect of shares. CTA10/S1117 (1) extends 'share' to iclude stock and any other interest of a member in a company. Under UK company law a 'joint stock' (capital) company is formed on the basis that its members are exclusively share or stock holders, CA06/S1041, so that 'in respect of shares' is linked with membership. 'To a member' is the feature mentioned at CTA10/S1020 dealing with CTA10/S1000 (1) G.

For distributions made on or after 17 July 2012 CTA10/S1000 (1) B applies to a transfer of assets before paragraph G - see FA12/S33. In particular, paragraph B should be applied where an asset has been transferred to an associate of a member rather than to a member, although arguably since directors have a fiduciary duty to act for the benefit of a company and its members, any distribution or transfer of assets out of the company not for consideration may be expected to benefit the members unless charitable.

In some circumstances CTA10/S1000 (1) B does not apply to a transfer of assets between companies, see CTM15300 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm15300).

More precisely, CTA10/S1000 (1) B extends the meaning of distribution to include 'any other [than dividend] distribution out of assets of the company in respect of shares in the company, except however much (if any) of the distribution represents repayment of capital on the shares, or is (when it is made) equal in amount or value to any new consideration received by the company for the distribution'.

For definition of the various terms see CTM15130 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm15130).

A company might contend that a transfer is not ‘in respect of shares’ if the transfer is to someone who has never been a member of the company, although see the discussion above about fiduciary duty. Moreover, CTA10/S1113 (3) and (4) specifically provides that something is done in respect of a share if
- it is done to a person as being, or having been, the holder of a share, or
- it is done in pursuance of a right granted or offer made in respect of a share.
The Special Commissioners in the Noved case (2006) SpC 521 confirmed that that the words of ICTA88/S254 (12) (now CTA10/S1113 (3) and (4)) impose sufficient but not necessary conditions for something to be treated as done in respect of shares. It follows that the exercise by a shareholder of a right to require a payment to a third party, and the subsequent payment out of the assets of the company to the third party, would be a payment in respect of a share even though it is not made to a member, if there remained any doubt.

In the Noved case, which is discussed furher at CTM15250 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm15250), the Special Commissioners also decided that:
- The transfer of assets at undervalue is capable of falling within both ICTA88/S209 (2)(b) and (4), (now CTA10/S1000 (1) B and (1) G, references used in the following items);
- Cash transfers are within both CTA10/S1000 (1) B and (1) G);
- A gift by a trading company to a charity by which it is owned is not necessarily a distribution within CTA10/S1000 (1) B;
- a transfer of assets to a shareholder for a consideration in assets of value less than the value of the assets transferred to the company,
- any transfer of assets to a shareholder for a cash consideration less than their value, and
- any transfer of assets to a company by a shareholder for a cash consideration paid by the company of more than the value of the assets moving to it.
Where the company cannot show a payment was made out of its assets for consideration it may be inferred that the payment was made in respect of shares, unless there is evidence it is eleemosynary in nature, that is, it is a charitable gift.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000).

Refer for advice:
- any net transfer of value from a company in circumstances where it is argued that the distributions legislation does not apply, and
- the transfer of value is not taxed as employment income.