Corporation Tax Act 2009 section 410

Exceptions to section 409

Section 410 sets out the circumstances in which the restriction on tax deductions for deeply discounted securities issued by close companies (imposed by section 409) does not apply.

• The section 409 restriction is disapplied if the creditor is a company and the full discount is being taxed as a credit in the creditor's hands for the same period.
• It is also disapplied where the issuing company is only treated as close because of a collective investment scheme (CIS) limited partnership, no relevant person is resident in a non-qualifying territory, and the issuer is a small or medium-sized enterprise.
• A further exception applies where the debt is owed to a CIS limited partnership, no partnership member is resident in a non-qualifying territory, the issuer has written confirmation of this, and the issuer is a small or medium-sized enterprise.
• A non-qualifying territory is one that does not have a qualifying double tax treaty with the UK, and a territory is treated as "non-taxing" if companies are not liable to tax there by reason of domicile, residence or place of management.