Taxes Consolidation Act 1997 Schedule 22 paragraph 3

Post-acquisition profits and their allocation

Paragraph 3 of Schedule 22 sets out the rules for determining how much of a company's post-acquisition profits are available for payment of a dividend on the relevant class of shares.

• The company's profits arising between the relevant date (acquisition date) and the dividend payment date must first be reduced by a fair and reasonable amount set aside for dividends on other classes of shares, as determined by the Appeal Commissioners.
• Where no previous dividend on the same class of shares became payable in the period from the relevant date to the current dividend payment date, the full amount of the company's profits for that period (after the deduction for other share classes) is treated as available for payment of the dividend.
• Where a previous dividend on the same shares was payable in that period, the profits are first applied to fund that earlier dividend (to the extent it is not regarded as paid from pre-acquisition profits), and only any remaining balance is treated as available for the later dividend.
• Where dividends on another class of shares have already been treated as paid out of pre-acquisition profits, the Appeal Commissioners may reduce the amount to be set aside for that class accordingly.