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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Deemed loan relationships: shares with guaranteed returns: non-qualifying shares: meaning of non-qualifying shares

Non-qualifying shares

This guidance applies to companies that hold shares up to 21 April 2009

CTA09/S526 provides a definition of a non-qualifying share. A share is non-qualifying if:

  • it is not one where CTA09/S130 applies in relation to distributions in respect of the share, and
  • one or more of the three conditions in S527 to S533 is satisfied.

Clearly, where the share pays a distribution and CTA09/S130 applies, that share is held as trading stock of a financial trade and so increases in value will be taxed as trading profits on general principles and so there is no need for S526 to apply.

The Treasury is given a regulatory power by CTA09/S533 to add, vary or remove conditions for the purposes of S526, and also to make consequential changes to the tax treatment of assets or transactions mentioned in the condition.