Corporation Tax Act 2010 section 174B

Certain mortgage arrangements not within section 173

Section 174B excludes certain mortgage arrangements secured by shares or securities from being treated as option arrangements under section 173, thereby preserving group relief eligibility where the mortgage is a genuine security arrangement.

• Where shares or securities in a company are used as collateral under a mortgage, that mortgage is not treated as an option arrangement under section 173, provided the mortgagee has not yet exercised its enforcement rights.
• The exclusion does not apply if the mortgagee holds greater rights over the shares or securities than are needed to protect its interest as lender.
• The exclusion also does not apply if the mortgagee, alone or together with connected persons, can dictate the terms or timing of any default or other trigger event that would allow it to enforce its rights.
• The mere existence of the mortgage does not, by itself, make the mortgagee a connected person of the company whose shares or securities are mortgaged.