Corporation Tax Act 2010 section 1005

Meaning of "non-commercial securities"

Section 1005 defines what "non-commercial securities" means for the purposes of the distribution rules in section 1000(1), paragraph E.

• A company's securities are "non-commercial" if the return paid by the company for the use of the principal exceeds a reasonable commercial rate
• The test compares the actual consideration given by the company against what would be a fair market return for the use of the secured principal
• This definition is relevant to determining whether a distribution arises under paragraph E of section 1000(1)
• Further rules in sections 1006 to 1014 also affect the scope and amount of any distribution falling within paragraph E