Most payments by a company to its shareholders are treated as distributions unless there are specific provisions to the contrary. For example a return of capital or certain purchases of own shares.
There are also anti-avoidance provisions that treat certain transactions in securities as if they were distributions where there is a tax avoidance motive and the fundamental change of ownership exclusion does not apply.
The government has announced the publication of a consultation on the rules concerning company distributions.
Changes to the transactions in securities provisions and the introduction of a targeted anti-avoidance rule which prevent the conversion of income into capital in order to gain a tax advantage will be contained in Finance Bill 2016.
With the increase in income tax rates on dividends coming into force in April 2016, it seems opportune to look at which transactions should be treated as distributions as there may be a greater incentive to convert income into capital gains.
HMRC have been looking closely at applications for clearance in respect of transactions in securities and have no doubt identified trends in the types of transaction that they would like to stop.