Taxes Consolidation Act 1997 section 135

Distributions: supplemental

Section 135 provides additional rules of interpretation for the term 'distribution' and contains anti-avoidance measures to counter collusive arrangements between companies and schemes to extract value from a company as capital rather than income.

• New consideration means money or value that does not come from the company's own assets; share premiums representing new consideration retain that status even if later applied in paying up share capital, unless previously treated as enabling a repayment of share capital.
• Consideration derived from the value of a company's shares or voting rights is not new consideration unless it consists of a distribution received from the company, a repayment of share capital, or the surrender of rights on cancellation or acquisition of shares by the company.
• Anti-avoidance rules treat payments as distributions where companies collude to make distributions to each other's members, or where a close company member arranges for the sale consideration to be funded from the company's assets; in a share exchange between two close companies, new consideration is restricted to the amount originally subscribed.
• Within a 90% group, the meaning of distribution is extended so that anything distributed out of a company's assets in respect of shares or securities of another group company is treated as a distribution, and the terms 'share' and 'security' are broadly defined to include stock, member interests, and unsecured loan capital.