TCGA92/S122 (2)

A capital distribution is not treated as a disposal if the distribution is small compared with the value of the shareholding, TCGA92/S122 (2). The amount of the distribution is deducted from the allowable cost of the shares. No account is taken of these distributions in deciding whether a taxpayer has used up their annual exempt amount.

HMRC's long held approach has been that `small' means 5 per cent or less of the value of the shares at the date of the distribution. This view was published in the November 1992 edition of Tax Bulletin, and elsewhere. You make the comparison by reference to the value of the shareholding immediately before the distribution.

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