The text treats "distribution" in a close company as including amounts required by subsection (3). A participator includes an associate and a participator in a company which controls another company is treated as a participator in that other company. Where a close company incurs expense in providing living or other accommodation, entertainment, domestic or other services, or other benefits or facilities for a participator, the company is treated as making a distribution equal to the expense not made good by the participator. Paragraph (a) excludes expenses for persons to whom section 118 applies as director or employee, and specified pension, annuity, lump sum, gratuity or like benefits for their spouse, civil partner, children or dependants.

References to expense include a proper proportion and section 119 applies with references to subsection (3) substituted. Subsection (3) does not apply if both company and participator are resident in the State and one is a subsidiary of the other or both are subsidiaries of a third resident company and the benefit arises on transfer of assets or liabilities between them. Subsidiary is determined on a 51 per cent test subject to exclusions for shareholdings treated as trading receipts or for companies not resident in the State. Where two or more close companies act in concert in making a payment to a person who is a participator in another of those companies, each such company and its participators are treated as if they had made the payment; the rule applies with necessary modifications to giving consideration and providing facilities.