Corporation Tax Act 2009 section 529

The redemption return condition

Section 529 sets out the second condition that must be met for a share to be classified as a non-qualifying share, focusing on whether a redeemable share produces a return that is economically similar to commercial interest.

• This condition applies to redeemable shares — shares that the issuing company can buy back or that the holder can require the company to buy back.
• The test asks whether the return a shareholder receives on redemption is economically equivalent to the return they would receive from a loan paying commercial interest.
• Certain types of redeemable shares are excluded from this condition, so not every redeemable share will automatically be caught.
• This is one of several conditions used to identify shares that behave more like debt than equity, which affects how they are treated for corporation tax purposes.

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