Corporation Tax Act 2009 section 527

The increasing value condition

Section 527 sets out the first condition that must be met for a share to be treated as a "non-qualifying share" — broadly, where the underlying assets of the company grow in value at a rate comparable to a commercial interest rate, rather than producing actual income.

• This is one of the conditions used to identify shares that behave more like a debt investment than a genuine equity holding, because their value grows steadily rather than generating dividends or other income.
• A share meets the "increasing value condition" if the assets of the company in which the shares are held are increasing in value at a rate similar to a commercial rate of interest.
• The key characteristic is that the shares do not produce income themselves — instead, the return to the holder comes through the steady appreciation in the value of the company's underlying assets.
• Where this condition is satisfied (alongside the other conditions in section 526), the shares are treated as non-qualifying shares, which affects how any related debtor loan relationship is dealt with for corporation tax purposes.