Overview of legislation

The rules relating to the tax treatment of shares accounted for as liabilities mean that, under certain circumstances, certain shares are treated as rights under a creditor relationship of the company holding the shares and, hence, will be taxed under the loan relationships regime.

The primary requirement that must be met is that, in accordance with generally accepted accounting practice, the share would be accounted for by the issuing company as a liability (CTA09/S521C(1)(a). This means generally accepted accounting practice as defined by CTA10/S1127 and therefore refers to either IAS32, FRS25 or FRS 102.

The further requirements that must be met are:

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