Corporation Tax Act 2009

[F1 486E Excluded shares U.K.

(1) This Chapter does not apply in relation to an accounting period (“ the relevant accounting period ”) of a company (“the holding company”) for which an arrangement produces a return for the company if the arrangement involves only relevant shares held by the company throughout the relevant period.

(2) In this section “ the relevant period ” means the period—

(a) beginning with the later of—

(i) the time when the holding company becomes party to the arrangement, and

(ii) the time when the arrangement begins to produce a return for the company, and

(b) ending with the earliest of—

(i) the end of the relevant accounting period,

(ii) the time when the holding company ceases to be party to the arrangement, and

(iii) the time when the arrangement ceases to produce a return for the company.

(3) For the purposes of this section an arrangement “involves only” relevant shares if (and only if) the return produced reflects only an increase in the fair value of the shares.

(4) For the purposes of subsection (3)—

(a) “ fair value ”, in relation to relevant shares held by the holding company, means an amount which the company would obtain from a knowledgeable and willing purchaser of the shares dealing at arm's length, and

(b) there is an increase in the fair value of shares even if the increase is realised by the payment of a distribution in respect of the shares.

(5) In this section “ relevant shares ” means shares which, throughout the relevant period, are—

(a) fully paid-up shares of a relevant company, or

(b) shares of a company, other than a relevant company, which would be accounted for as a liability by the company in which they are shares in accordance with generally accepted accounting practice and which produce for the holding company a return in relation to any amount which is economically equivalent to interest (as to which see Chapter 6A).

(6) For the purposes of subsection (5)(a) shares are fully paid-up if there are no actual or contingent obligations—

(a) to meet unpaid calls on the shares, or

(b) to make a contribution to the capital of the company in which they are shares that could affect the value of the shares.

(7) For the purposes of subsection (5) a company is “a relevant company” if—

(a) it and the holding company are connected companies,

(b) it is a relevant joint venture company, or

(c) it is a relevant controlled foreign company.

(8) Section 466 (companies connected for an accounting period) applies for the purposes of subsection (7)(a).

(9) For the purposes of subsection (7)(b) a company is a relevant joint venture company if—

(a) the holding company is one of two persons who, taken together, control it,

(b) the holding company is a person in whose case the 40% test in section 755D(3) of ICTA is satisfied, and

(c) the other is a person in whose case the 40% test in section 755D(4) of ICTA is satisfied.

(10) Section 755D of ICTA (meaning of “control” etc ) applies for the purposes of subsection (9)(a) as for those of Chapter 4 of Part 17 of that Act (controlled foreign companies), except that no rights and powers are attributed to a person by subsection (6)(c) or (d) of that section.

(11) For the purposes of subsection (7)(c) a company is a relevant controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA )—

(a) are apportioned to the holding company for the relevant accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or

(b) are not so apportioned because of section 748(1) or (3) of that Act.

(12) Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this section.]

Textual Amendments

F1 Pt. 6 Ch. 2A inserted (with effect in accordance with Sch. 24 paras. 11, 13-16 of the amending Act) by Finance Act 2009 (c. 10), Sch. 24 para. 3