Corporation Tax Act 2009

531 The redemption return condition: unallowable purposes

(1) For the purposes of section 530, a share is acquired by the investing company for an unallowable purpose if—

(a) the purpose for which the company holds the share or one of the main purposes is to circumvent section 130 (traders receiving distributions etc), or

(b) the purpose for which it does so or one of the main purposes is any other purpose which is a tax avoidance purpose (see subsection (4)).

(2) The condition in subsection (1)(a) is taken to be met, in particular, if the investing company was an associated company of a bank at the time when the investing company acquired the share.

(3) But subsection (2) does not apply if the investing company shows that—

(a) immediately before that time, some or all of its business consisted of making and holding investments, and

(b) it acquired the share in the ordinary course of that business.

(4) In this section—

• “bank” has the meaning given by section 840A of ICTA, and

• “tax avoidance purpose”, in relation to a company, means any purpose which consists of securing a tax advantage (whether for the company or another person).

(5) Section 530(6) (when companies are associated) applies for the purposes of this section as it applies for the purposes of section 530.