Corporation Tax Act 2009 section 931I

Dividends in respect of shares accounted for as liabilities

Section 931I provides an exemption for dividends paid on shares that are accounted for as liabilities but are not taxed under the loan relationship rules because they are not held for an unallowable purpose.

• Shares accounted for as liabilities would normally be taxed under loan relationship rules, but where they are not held for an unallowable purpose, they fall outside that regime
• Without this section, such dividends could still be taxable under the distribution exemption rules in Part 9A, so this section provides a specific exemption
• A dividend falls into an exempt class where the only reason the loan relationship treatment does not apply is that the share is not held for an unallowable purpose
• The definition of "unallowable purpose" is set out separately in section 521E of the Corporation Tax Act 2009