Corporation Tax Act 2009 section 521B

Application of Part 5 to certain shares as rights under creditor relationship

Section 521B sets out how certain shares that are accounted for as liabilities are treated as loan relationships for corporation tax purposes, rather than as equity investments.

• Shares that fall within section 521C (shares accounted for as liabilities) are treated as rights under a creditor relationship of the investing company, bringing them within the loan relationships rules in Part 5
• Any distribution received on such a share is stripped of its character as a distribution and is instead taxed under the loan relationships regime
• The company that issued the share is treated as the debtor under the deemed loan relationship, which ensures other tax rules such as transfer pricing can operate correctly
• The investing company cannot claim tax debits in respect of the share, except for debits arising from exchange gains or losses