Corporation Tax Act 2010 section 742

Abnormal dividends: the excessive accrual condition

Section 742 defines the "excessive accrual condition" used to identify abnormal dividends, and sets out circumstances in which that condition is treated as not being met.

• A dividend is considered excessive if it substantially exceeds the amount the recipient would have received had the dividend accrued on a day-to-day basis over the period they actually held the securities.
• The excessive accrual condition is treated as not met if, within six months of purchasing the securities, the recipient neither disposes of the securities (or similar securities) nor acquires an option to sell them.
• Securities are regarded as "similar" if they carry the same rights to capital and interest against the same persons, and the same remedies for enforcing those rights, regardless of differences in nominal amounts, form, or method of transfer.
• Rights guaranteed by the Treasury are treated as rights against the Treasury itself for the purpose of determining whether securities are similar.