Section 1089 — Corporation Tax Act 2010: Meaning of “chargeable payment”: unquoted companies

Meaning of “chargeable payment”: unquoted companies 1089 1 This section applies if a company concerned in an exempt distribution is an unquoted company and a person makes a payment (to any person) in pursuance of a scheme or arrangement made—

a with the unquoted company, or b if the unquoted company—

i is under the control of 5 or fewer persons (its “main participators”),

and ii is not excepted by subsection (6), with any of the unquoted company's main participators.

2 The payment is a chargeable payment if it meets each of conditions B1 to D1.

3 Condition B1 is that the payment is made—

a in connection with the shares in the company (if it is a company) making the payment, b in connection with the shares in any company concerned in the exempt distribution, or c in connection with any transaction affecting the shares mentioned in paragraph (a) or (b).

4 Condition C1 is that the payment—

a is not made for genuine commercial reasons, or b forms part of a tax avoidance scheme.

5 Condition D1 is that the payment (if made by a company)—

a is not a distribution or an exempt distribution, and b is not made to a company that belongs to the same group as that company.

6 The unquoted company is excepted for the purposes of subsection (1)(b)(ii) if—

a it is under the control of (and only of) a company, and b that company is not under the control of 5 or fewer persons.