Corporation Tax Act 2010

Distributions in respect of non-commercial securities

1005 Meaning of “non-commercial securities”

For the purposes of paragraph E in section 1000(1) securities of a company are non-commercial securities if the consideration given by the company under the securities for the use of the principal secured by them represents more than a reasonable commercial return for the use of that principal.

1006 Distributions exceeding consideration received for issue of security

No amount is to be regarded for the purposes of paragraph E in section 1000(1) as representing the principal secured by a security so far as it exceeds any new consideration which has been received by the company for the issue of the security.

1007 Securities issued at premium representing new consideration

(1) This section applies if any security of a company is issued at a premium representing new consideration (but see also section 1008).

(2) In relation to a distribution in respect of the security, the reference in paragraph E in section 1000(1) to however much of the distribution represents the principal secured by the security is to be read as a reference to the sum of—

(a) however much of the distribution represents the principal, and

(b) however much of it represents the premium.

(3) In relation to a distribution in respect of the security, the reference in paragraph E in section 1000(1) to however much of the distribution represents a reasonable commercial return for the use of the principal secured by the security is to be read as a reference to the sum of—

(a) however much of the distribution represents a reasonable commercial return for the use of the principal, and

(b) however much of it represents (when regard is had to the extent to which distributions represent the premium) a reasonable commercial return for the use of the premium.

1008 Consideration for issue of security exceeding amount of principal

(1) This section applies if—

(a) a company issues a security, and

(b) the amount of new consideration received by the company for the issue of the security exceeds the amount of the principal secured by the security.

(2) The amount of the principal is treated for the purposes of paragraph E in section 1000(1) as increased to the amount of that new consideration.

(3) Section 1007 does not have effect in relation to the security.

(4) This section is subject to sections 1009 and 1012.