Corporation Tax Act 2009 section 535

Shares ceasing to be shares to which section 523 applies

Section 535 deals with what happens when shares that were previously treated under the loan relationships rules (section 523) stop qualifying for that treatment — they are deemed to have been disposed of and immediately reacquired.

• When shares cease to meet the conditions of section 523, a deemed disposal and reacquisition is triggered at that point.
• This ensures that any gains or losses accrued while the shares were within the loan relationships regime are properly recognised.
• The deemed disposal and reacquisition effectively draws a line, separating the period when the shares were taxed under loan relationships rules from any subsequent treatment.
• This provision prevents companies from avoiding a tax charge by simply holding shares that move out of the loan relationships category without a crystallising event.