Taxes Consolidation Act 1997 section 591A

Dividends paid in connection with disposals of shares or securities

Section 591A provides that abnormal dividends paid in connection with the disposal of shares or securities are to be treated as consideration for the disposal rather than as dividends, thereby ensuring the amounts are subject to capital gains tax.

• A dividend paid in connection with a disposal of shares or securities is "abnormal" if it exceeds the amount that could reasonably have been expected to be paid if there were no such disposal.
• Where an abnormal dividend is paid under a scheme, arrangement or understanding in connection with a share disposal, the dividend is re-characterised as consideration for the disposal and is no longer treated as a dividend for tax purposes.
• The rule applies where the abnormal dividend is paid to the person disposing of the shares (if a company), to a connected company, or — where the person disposing is not a company — to a company connected with that person.
• The section does not apply if the scheme is effected for bona fide commercial reasons and does not form part of an arrangement a main purpose of which is the avoidance of tax.