Taxes Consolidation Act 1997 section 436

Certain expenses for participators and associates

Section 436 extends the meaning of "distribution" for close companies to include expenses incurred in providing benefits and facilities for participators, where those benefits are not already chargeable as benefits in kind.

• Where a close company provides benefits such as accommodation, entertainment, domestic services or other facilities to a participator (or their associate), the cost is treated as a distribution to that participator to the extent it is not reimbursed by them.
• The rule does not apply to benefits already taxed as benefits in kind under the BIK provisions, nor to pensions, annuities, lump sums or similar death and retirement benefits provided for dependants of directors or employees.
• Where expenditure is partly for business purposes and partly for private benefit, an appropriate apportionment is made; the BIK valuation rules under section 119 apply in determining the value of the benefit.
• The distribution treatment does not apply to asset or liability transfers between two resident companies where one is a 51% subsidiary of the other or both are subsidiaries of a third resident company; anti-avoidance provisions counter arrangements between two or more close companies to make payments to each other's participators.