Corporation Tax Act 2010 section 1015

Meaning of "special securities"

Section 1015 defines what counts as a "special security" for the purposes of the distribution rules in section 1000, setting out five conditions (A to E) any one of which, if met, will make a security "special" and potentially bring interest or other returns within the distribution regime rather than being treated as normal debt.

• Securities are "special" if they meet any one of five conditions (A to E), meaning interest paid on them may be treated as a distribution rather than a deductible expense.
• The conditions target securities issued without new consideration, unlisted convertibles, securities where the return depends on business results, securities connected with shares, and equity notes held by associated or funded companies.
• Hybrid capital instruments (as defined in CTA 2009 section 475C) are specifically excluded from being treated as special securities under Condition E alone.
• If a security falls within any of these conditions, the company paying interest or other returns on it needs to consider whether those payments are reclassified as distributions, which are not deductible for corporation tax purposes.