Distributions paid by a UK or overseas company are chargeable to corporation tax on the recipient unless the distribution is exempt1. When determining if a distribution is exempt, two different regimes apply depending upon whether the recipient is a small company (see below) or not (see D5.152).
Provided a taxpayer does not elect otherwise (D5.150), distributions received by small companies (as defined below) in the accounting period of receipt will be exempt either under the general exemption or the exemption for distributions received from a controlled foreign company (CFC) (see D4.435). These are both detailed further below.
General exemption for distributions received by small companies
A dividend or distribution received by a small company in an accounting period in which it is small will be exempt if all the following four conditions are met2:
- Ìý
•ÌýÌýÌýÌý the payer is resident only either in the UK or a qualifying territory at the time of receipt
- Ìý
•ÌýÌýÌýÌý the distribution is not a distribution on a non-commercial security (D5.120) or a distribution on a special
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