Introduction Background Note
8.Part 23 CTA 2010 covers the meaning of distribution for the purposes of corporation tax.  This includes:
	any distribution out of the assets of the company in respect of shares except amounts that represent the repayment of capital on shares, (“paragraph B distribution”) and,
	a transfer of assets or liabilities by a company to its member, or by a member to the company where the benefit to the member exceeds the consideration given by the member, (“paragraph G distribution”).
Previously, a transfer of assets or liabilities between a company and its members could fall within both paragraph B and paragraph G if all other conditions of those sections were satisfied.
9.This section will ensure that where the transfer is a paragraph B distribution, or would be if not for the exception for repayment of capital on the shares, it will not be treated as a paragraph G distribution.
10.Sections 1002 and 1021 CTA 2010 excluded from the definition of distribution in paragraph B and paragraph G respectively transfers of assets and liabilities between:
	UK resident companies neither of which is a 51 per cent subsidiary of a non-resident company and which are not under common control; and
	UK resident companies where one is a 51 per cent subsidiary of the other, or both are 51 per cent subsidiaries of another UK resident company.
11.The predecessor legislation to sections 1002 and 1021 CTA 2010 was introduced to relieve companies from the obligation to account for income tax or (after the imputation system was introduced by FA 1972) Advance Corporation Tax (ACT) on making a distribution in the form of a transfer of an asset or liability to another UK company. Since the abolition of ACT by FA 1998, the legislation is no longer required and is now producing anomalies, with tax treatment depending on the residence of the companies involved.
12.This legislation will align the tax treatment of transfers between UK resident companies with transfers between UK and non-UK resident companies, by allowing transfers between UK companies to be treated as distributions for the purposes of CTA 2010.