Finance (No. 2) Act 1992

31 Equity notes. U.K.

(1) In section 209 of the Taxes Act 1988 (meaning of “distribution" for purposes of Corporation Tax Acts) in subsection (2)(e) after sub-paragraph (vi) there shall be inserted “or

(vii) equity notes issued by the company (“the issuing company”) and held by a company which is associated with the issuing company or is a funded company;”.

(2) In that section the following subsections shall be inserted after subsection (8)—

“(9) For the purposes of subsection (2)(e)(vii) above a security is an equity note if as regards the whole of the principal or as regards any part of it—

(a) the security’s terms contain no particular date by which it is to be redeemed,

(b) under the security’s terms the date for redemption, or the latest date for redemption, falls after the expiry of the permitted period,

(c) under the security’s terms redemption is to occur after the expiry of the permitted period if a particular event occurs and the event is one which (judged at the time of the security’s issue) is certain or likely to occur, or

(d) the issuing company can secure that there is no particular date by which the security is to be redeemed or that the date for redemption falls after the expiry of the permitted period;

and the permitted period is the period of 50 years beginning with the date of the security’s issue.

(10) For the purposes of subsection (2)(e)(vii) above and subsection (11) below a company is associated with the issuing company if—

(a) the issuing company is a 75 per cent. subsidiary of the other company,

(b) the other company is a 75 per cent. subsidiary of the issuing company, or

(c) both are 75 per cent. subsidiaries of a third company.

(11) For the purposes of subsection (2)(e)(vii) above a company is a funded company if there are arrangements involving the company being put in funds (directly or indirectly) by the issuing company or a company associated with the issuing company.”

(3) In section 212 of the Taxes Act 1988 (exclusions from “distribution") in subsection (1)(b) after “(vi)" there shall be inserted “ and (vii) ”.

(4) This section shall apply where the interest or other distribution is paid after 14th May 1992.