Revenue Note for Guidance
This section defines the profits available for distribution to equity holders for the purposes of section 412. The percentage to which one company is entitled of any profits available for distribution is fixed as the percentage to which it would be entitled on a full distribution in money of the profits of the other company for the accounting period or, if there are no profits in the accounting period, profits of €100. The profits referred to are the commercial profits (not profits as computed for tax purposes) and, accordingly, are calculated after deducting fixed rate preference dividends and normal commercial loan interest.
The section is necessary because strictly a shareholder is not entitled to any part of the profits unless and until a dividend is declared. The token figure of €100 provides for the case where there are no commercial profits in the accounting period and therefore no basis on which to calculate the equity holders underlying percentage entitlements.
(1) The percentage to which one company is entitled of any profits available for distribution is the percentage to which it would be entitled in the relevant accounting period (see section 419) on a distribution in money of —
(2) This distribution is referred to as “the profit distribution”.
For the purposes of the profit distribution, it is assumed that no repayment of capital or secured principal is made unless that repayment is a distribution.
(3) Where an equity holder is entitled by reason of being an equity holder to a payment which apart from this subsection would not rank as a distribution, the payment is nevertheless treated as an amount to which the equity holder is entitled on the profit distribution.
Relevant Date: Finance Act 2020