Corporation Tax Act 2010 section 171

Shares or securities with temporary rights

Section 171 addresses situations where equity holders hold shares or securities whose rights to profits or assets may change over time, triggering an alternative calculation under section 172.

• Where an equity holder holds shares or securities with distribution rights that could change after the relevant accounting period, a special calculation under section 172 is required
• The test compares what the equity holder would receive at the relevant time with what they would receive at a later date, whether from a profit distribution or a notional winding up
• An equity holder's "entitlement" means the proportion of profits on a distribution, or assets on a notional winding up, to which they would be beneficially entitled at any given point in time
• If the entitlement would differ between the relevant time and a later time, the shares or securities are treated as having temporary rights and the alternative calculation applies