Corporation Tax Act 2009 section 526

Non-qualifying shares

Section 526 defines "non-qualifying shares" — shares that are treated as producing returns equivalent to interest because the gains on them are predictable, owing to the nature of the assets that underlie them.

• Non-qualifying shares are one of the categories of shares that fall within the disguised interest rules (section 523 of CTA 2009).
• A share is a non-qualifying share when its likely economic return is predictable because of the composition of the assets backing it.
• For shares to be classified as non-qualifying, at least one of three separate conditions must be satisfied — these conditions are set out in sections 527 and 529 to 532.
• Where shares are non-qualifying, the return on them is taxed as if it were a loan relationship credit rather than a share-based return, ensuring it is subject to corporation tax on an income basis.