Taxes Consolidation Act 1997 section 436A

Certain settlements made by close companies

Section 436A prevents close companies from transferring funds to shareholders or family members on a tax-free basis through trust settlements.

• Any amount settled by a close company under a relevant settlement is deemed to be a distribution to the trustees, giving rise to a dividend withholding tax obligation on the company.
• A relevant settlement is any settlement made by or on behalf of a close company that could potentially benefit a member of the company or a relative of a member.
• Where a member or relative receives funds from a relevant settlement, the excess over any consideration given by that person is treated as Case IV income and taxed at the marginal rate.
• The section does not apply where the settlement was not made as part of a scheme or arrangement whose purpose, or one of whose purposes, was the avoidance of tax.

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