Corporation Tax Act 2010 section 28

Associated companies: fixed-rate preference shares

Section 28 provides a rule that certain fixed-rate preference shares are disregarded when determining whether one company controls another for the purposes of the associated companies rules.

• When determining whether companies are associated through control, certain fixed-rate preference shares can be ignored if three conditions are met.
• The three conditions are: the shares must be fixed-rate preference shares, the holding company must not participate in the management or conduct of the issuing company's business, and the shares must not entitle the holder to more than a fixed-rate return.
• Fixed-rate preference shares are shares that carry a right to a dividend at a fixed rate but carry no other right to share in the profits of the company, and that do not carry any right to vote at general meetings of the company.
• This rule ensures that a company holding another company's fixed-rate preference shares purely as a passive investment is not treated as controlling that company solely because of that shareholding.