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HMRC internal manual

International Manual

Distribution exemption: Anti-avoidance legislation: quasi-preference or quasi-redeemable shares

CTA09/S931K: Schemes involving quasi-preference or quasi-redeemable shares

A distribution falls within an exempt class under CTA09/S931F provided that it is paid in respect of a non-redeemable ordinary share. This creates a risk that schemes might be set up that give a shareholder rights equivalent to a share that is either redeemable or that carries preference, but these rights are given otherwise than through the terms of the share issue.

CTA09/S931K is relevant only in those cases where a distribution is exempt solely by reason of S931F. If it is exempt under any other class, S931K will not prevent the distribution from falling into that other class and so will not prevent it from being exempt.

S931K applies only if two conditions are met:

  • There must be a scheme that has as its main purpose, or one of its main purposes, to obtain exemption under S931F.
  • Rights must exist of a nature that, if they had been attached to the share, would prevent a distribution from being exempt by virtue of S931F (see INTM653040).

Where it applies, the effect of S931K is to prevent a distribution from being exempt by virtue of S931F.