Corporation Tax Act 2010 section 1071

Companies not carrying on a business

Section 1071 restricts the application of corporation tax distribution rules for companies that have never carried on a trade, held investments as a business, or held an office.

• The section applies only to companies that have never traded, never held investments as a business, and never held an office, and were not established with the intention of doing any of these things.
• Where these conditions are met, the corporation tax rules on distributions apply only to distributions made out of the company's taxable profits (income and chargeable gains) or out of income consisting of exempt ABGH distributions.
• An exempt ABGH distribution is one that counts as a distribution solely because it falls within paragraph A, B, G or H of section 1000(1), and is exempt under Part 9A of CTA 2009 dealing with company distributions.
• The practical effect is that payments made by such dormant or non-trading companies are generally outside the distribution rules unless funded from profits already subject to corporation tax or from qualifying exempt distributions.