Corporation Tax Act 2010 section 174

Company A's proportion if option arrangements in place

Section 174 requires an alternative calculation of Company A's proportion of the profits or assets of a consortium company where option arrangements exist that could lead to the acquisition of shares or securities, and uses the lowest possible outcome as the relevant proportion.

• Where option arrangements are in place that could result in someone acquiring shares or securities in the company, every possible combination of those options being exercised must be tested to see how Company A's proportion would be affected.
• For each possible scenario, the rights and duties of all participating equity holders must be determined, along with what Company A's proportion would be under those circumstances.
• The lowest proportion identified across all scenarios is called the "alternative proportion," and if it is lower than the proportion calculated without considering these options, it replaces Company A's proportion.
• This section specifically addresses options that lead to the acquisition of shares or securities, as distinct from options that change the rights carried by existing shares or securities (which are dealt with under section 171), and is subject to the further rules in sections 176 to 178 and 180.