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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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Groups & consortia: groups - entitlement to profits or assets available for distribution: convertible shares and securities

ICTA88/SCH18/PARA1 (5)

A share in a company:

  • can still be a fixed rate preference share, and
  • a loan to a company can still be a normal commercial loan,

even though it is convertible, provided the rights are to convert into:

  • shares or securities in the company’s quoted parent company, or
  • shares which meet all of certain conditions, or
  • securities which meet all of certain conditions.

The conditions for shares are that they:

  • are not convertible except into shares or securities in the company’s quoted parent company, and
  • do not carry rights to the acquisition of any additional shares or securities, and
  • satisfy the conditions in the first, third and fourth bullets under fixed rate preference shares in CTM81010.

The conditions for securities are that they are securities which:

  • represent a loan of, or including, new consideration, and
  • are not convertible, except into shares or securities in the company’s quoted parent company, and
  • do not carry rights to the acquisition of any additional shares or securities, and
  • satisfy the conditions of the third and fourth bullets of normal commercial loan in CTM81010.

Example

N Plc is Company C’s ‘quoted parent company’ if:

  • Company C is a 75% subsidiary of N Plc,
  • N Plc is not a 75% subsidiary of any company, and
  • N Plc’s ordinary shares (of all classes if more than one) are quoted on a recognised stock exchange (CTM60310 (g)).