RDRM12700 - Residence: The SRT: Temporary non-residence: Distributions from closely controlled companies

Where an individual receives, or becomes entitled to, distributions from a UK or overseas company during a period of temporary non-residence, and the company:

• is a close company
• if it is an overseas company, it would have been a close company had it been UK resident

And that individual is either:

• a material participator in the company
• an associate of such a participator

at a point within the tax year of departure, (the UK part if split year treatment applies), or the 3 previous tax years; then the distributions are charged to UK tax as if they received them in the period of their return.

If the distribution is a dividend, the charge does not apply to dividends that relate to trade profits that arose in the period of temporary non-residence.

HMRC will accept any just and reasonable attribution of dividends to post-departure trade profits that accords with the facts. But where a company has built up substantial reserves at the point the individual becomes non-resident and a dividend is subsequently paid, in a period of temporary non-residence, HMRC will consider the dividend is substantially made up of pre-departure profits, to the extent of the accumulated reserves, at the point the period of temporary non-residence starts