Corporation Tax Act 2010 section 18H

Associated companies: fixed-rate preference shares

Section 18H provides that certain fixed-rate preference shares are ignored when determining whether one company controls another for the purposes of the associated companies rules.

• Fixed-rate preference shares held by a company are disregarded when assessing control, provided specific conditions are met regarding the shareholder company's status and involvement.
• The shareholder company must not be a close company, must play no role in the management of the issuing company or its business, and must have subscribed for the shares in the ordinary course of a finance business.
• Fixed-rate preference shares are defined as shares issued wholly for new consideration, carrying no conversion or additional acquisition rights, and paying only fixed dividends that together with any redemption amount represent no more than a reasonable commercial return.
• This exclusion ensures that passive financial investments by lending institutions do not inadvertently create associated company relationships that would affect corporation tax thresholds.