Corporation Tax Act 2010

528 Conditions for company U.K.

(1) Condition A is that the company is a UK company.

(2) Condition B is that section 236 of FISMA 2000 (open-ended investment companies) does not apply to the company.

(3) Condition C is that—

[F1 (a) the shares forming the company's ordinary share capital are [F2 admitted to trading] on a recognised stock exchange] [F3 , or

(b) at least 70% of the shares forming the company’s ordinary share capital are owned by one or more institutional investors (see sections 528ZA and 528ZB).]

[F4 (3A) Subsection (3B) applies where condition C ceases to be met in relation to a company UK REIT or the principal company of a group UK REIT as a result of subsection (3)(b) ceasing to apply in relation to that company.

(3B) The company is to be treated as if condition C continued to be met in relation to that company as a result of that subsection for the period of 12 months beginning with the day on which this subsection begins to apply.]

(4) Condition D is that the company [F5 meets the non-close condition.]

F6 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F7 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F8 (4A) Institutional investor” means any of the following persons—

(a) the trustee or manager of—

(i) an authorised unit trust scheme (as defined in section 237(3) of FISMA 2000) [F9 that meets the genuine diversity of ownership condition (see section 528ZB(2)) or the non-close condition], or

(ii) a unit trust scheme (as defined in section 237(1) of FISMA 2000) which is authorised under the law of a territory outside the United Kingdom in a way which makes it, under that law, the equivalent of an authorised unit trust scheme (as defined in section 237(3) of that Act) [F10 and that meets the genuine diversity of ownership condition or the non-close condition];

(b) a company—

(i) which is an open-ended investment company (as defined in section 236(1) of FISMA 2000) incorporated by virtue of regulations under section 262 of that Act [F11 and that meets the genuine diversity of ownership condition or the non-close condition], or

(ii) which is incorporated under the law of a territory outside the United Kingdom [F12 that] is, under that law, the equivalent of an open-ended investment company (as defined in section 236(1) of FISMA 2000) [F13 and that meets the genuine diversity of ownership condition or the non-close condition];

[F14 (ba) a person acting on behalf of an authorised contractual scheme (within the meaning given by section 237(3) of FISMA 2000) which is a co-ownership scheme (within the meaning given by section 235A of that Act) that meets the genuine diversity of ownership condition or the non-close condition;]

(c) a person acting on behalf of a limited partnership which is a collective investment scheme (as defined in section 235 of FISMA 2000) [F15 that meets the genuine diversity of ownership condition or the non-close condition];

(d) the trustee or manager of a pension scheme (as defined in section 150(1) of FA 2004);

(e) a person acting in the course of a long-term insurance business (that is, the activity of effecting or carrying out contracts of long-term insurance within the meaning of the Financial Services and Markets (Regulated Activities) Order 2001 (S.I. 2001/544)) who [F16 meets the non-close condition and who]—

(i) is authorised under FISMA 2000 to carry on such business, or

(ii) has an equivalent authorisation under the law of a territory outside the United Kingdom to carry on such business;

(f) a charity;

(g) a person registered under any of the following provisions (which provide for registers of social landlords)—

(i) in England, section 111 of the Housing and Regeneration Act 2008;

(ii) in Scotland, section 20 of the Housing (Scotland) Act 2010 (asp 17);

(iii) in Wales, section 1 of the Housing Act 1996;

(iv) in Northern Ireland, Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15));

(h) a person who cannot be liable for corporation tax or income tax (as relevant) on the ground of sovereign immunity.

[F17 (i) a UK REIT;

(j) a person who is resident in a territory outside the United Kingdom in accordance with the law of that territory relating to taxation and is F18 ... the equivalent of a UK REIT]

(4B) The Treasury may by regulations amend the definition of “institutional investor” by inserting, omitting or amending a description of person in subsection (4A).]

[F19 (4C) The non-close condition is met—

(a) in relation to a company, if—

(i) it is not a close company, or

(ii) it is a close company but only because it has an institutional investor as a direct or indirect participator, and

(b) in relation to a person or scheme other than a company, if it would fall within paragraph (a)(i) or (ii) if—

(i) the person’s business or the scheme were a company, and

(ii) the interests of persons in the business or scheme were shares in the company.]

[F20 (4D) But for the purposes of applying the non-close condition for the purpose of any of paragraphs (a) to (c) of subsection (4A), subsection (4C) has effect as if—

(a) paragraph (a)(ii) were omitted, and

(b) in paragraph (b), in the words before sub-paragraph (i), “or (ii)” were omitted.]

(5) For the purposes of [F21 determining whether the non-close condition is met] a company is to be treated as a close

[F22 (a)] company if it is prevented from being a close company only by section 444 or 447(1)(a) [F23 , and

(b) ignore paragraph (a) of section 442 (non-UK resident companies deemed not to be close).]

[F24 (5A) But subsection (5)(a) does not apply for the purpose of determining whether a person acting in the course of a long term insurance business meets the non-close condition.]

[F25 (5B) For the purposes of subsection (4C)(a)(ii)—

(a) a person is a “direct participator” if the person is a participator for the purposes of Part 10 of CTA 2010 (see section 454), and

(b) a person is an “indirect” participator in a company if the person has a share or interest in the capital or income of the company through another body corporate or other bodies corporate.

(5C) In determining whether a person is an indirect participator—

(a) reference to having a share or interest in the capital or income of a company through a body corporate is to be read in accordance with sub-paragraphs (9) and (10) of paragraph 46 of Schedule 5AAA to TCGA 1992 (meaning of direct or indirect participator), and

(b) a person is regarded for the purposes of those sub-paragraphs, and for the purposes of subsection (5B)(b) of this section, as having a share or interest in the capital or income of a company if the person would be a participator in the company as a result of section 454(2) of CTA 2010.]

[F26 (5D) In determining whether a company is a close company for the purposes of the non-close condition—

(a) the rights and powers of a person (“A”) are not to be attributed to another person (“P”) merely because A is a partner of P for the purposes of any attribution under section 451(4) (rights of a person's associates to be attributed to the person etc in determining “control”), and

(b) a company (“C”) is not to be regarded as a close company only because a person possesses or is entitled to acquire 50% or more of the voting power in C as a result of being—

(i) a manager of a collective investment vehicle (within the meaning of Schedule 5AAA to TCGA 1992), or

(ii) a general partner in a limited partnership which is a collective investment scheme.]

(6) Condition E is that—

(a) each share issued by the company either—

(i) forms part of the company's ordinary share capital, or

(ii) is a non-voting restricted preference share, and

(b) there is no more than one class of ordinary share issued by the company.

(7) For the purposes of condition E—

(a) “restricted preference share” means a share which is a restricted preference share (within the meaning of section 160) or would be but for the fact that it carries a right of conversion into shares or securities in the company, and

(b) a share is “non-voting” if it carries no right to vote at a general meeting of the company or if it carries a right to vote which is contingent on the non-payment of a dividend and which has not become exercisable.

(8) Condition F is that in the case of a loan in respect of which the company is a debtor—

(a) the loan creditor is not entitled to an amount by way of interest which depends to any extent on the results of all or part of the company's business or on the value of any of the company's assets,

(b) the loan creditor is not entitled to an amount by way of interest which exceeds a reasonable commercial return on the consideration lent, and

(c) the loan creditor is entitled on repayment to an amount which either does not exceed the consideration lent or is reasonably comparable with the amount generally repayable (in respect of an equal amount of consideration) under the terms of issue of securities listed on a recognised stock exchange.

(9) For the purposes of condition F a loan is not dependent on the results of the company's business merely because the terms of the loan provide—

(a) for the interest to be reduced in the event of the results improving, or

(b) for the interest to be increased in the event of the results deteriorating.

Textual Amendments

F1 Words in s. 528(3)(a) in s. 528(3) renumbered as s. 528(3)(a) (1.4.2022 in relation to accounting periods (within the meaning of Part 12 of CTA 2010) that begin on or after that date) by Finance Act 2022 (c. 3), Sch. 3 paras. 2(2)(a)(i), 6(1)

F2 Words in s. 528(3) substituted (with effect in accordance with Sch. 4 para. 21 of the amending Act) by Finance Act 2012 (c. 14), Sch. 4 para. 15

F3 S. 528(3)(b) and word inserted (1.4.2022 in relation to accounting periods (within the meaning of Part 12 of CTA 2010) that begin on or after that date) by Finance Act 2022 (c. 3), Sch. 3 paras. 2(2)(a)(ii), 6(1)

F4 S. 528(3A)(3B) inserted (1.4.2022 in relation to accounting periods (within the meaning of Part 12 of CTA 2010) that begin on or after that date) by Finance Act 2022 (c. 3), Sch. 3 paras. 2(2)(b), 6(1)

F5 Words in s. 528(4) inserted (retrospectively) by Finance Act 2024 (c. 3), Sch. 7 para. 3(2)(a)(6)

F6 S. 528(4)(a) omitted (retrospectively) by virtue of Finance Act 2024 (c. 3), Sch. 7 para. 3(2)(b)(6)

F7 S. 528(4)(b) omitted (retrospectively) by virtue of Finance Act 2024 (c. 3), Sch. 7 para. 3(2)(b)(6)

F8 S. 528(4A)(4B) inserted (with effect in accordance with Sch. 4 para. 13(2)(3) of the amending Act) by Finance Act 2012 (c. 14), Sch. 4 para. 4(3)

F9 Words in s. 528(4A)(a)(i) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(2)(a)(i) (with Sch. 7 para. 5)

F10 Words in s. 528(4A)(a)(ii) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(2)(a)(ii) (with Sch. 7 para. 5)

F11 Words in s. 528(4A)(b)(i) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(2)(b)(i) (with Sch. 7 para. 5)

F12 Word in s. 528(4A)(b)(ii) substituted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(2)(b)(ii) (with Sch. 7 para. 5)

F13 Words in s. 528(4A)(b)(ii) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(2)(b)(iii) (with Sch. 7 para. 5)

F14 S. 528(4A)(ba) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 2

F15 Words in s. 528(4A)(c) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(2)(c) (with Sch. 7 para. 5)

F16 Words in s. 528(4A)(e) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(2)(d) (with Sch. 7 para. 5)

F17 S. 528(4A)(i)(j) inserted (1.4.2014) by The Real Estate Investment Trust (Amendments to the Corporation Tax Act 2010 and Consequential Amendments) Regulations 2014 (S.I. 2014/518), regs. 1(1), 2(2) (with reg. 1(2)-(4))

F18 Words in s. 528(4A)(j) omitted (1.4.2022 in relation to accounting periods (within the meaning of Part 12 of CTA 2010) that begin on or after that date) by virtue of Finance Act 2022 (c. 3), Sch. 3 paras. 2(2)(c), 6(1)

F19 S. 528(4C) inserted (retrospectively) by Finance Act 2024 (c. 3), Sch. 7 para. 3(3)(6)

F20 S. 528(4D) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(3) (with Sch. 7 para. 5)

F21 Words in s. 528(5) substituted (retrospectively) by Finance Act 2024 (c. 3), Sch. 7 para. 3(4)(6)

F22 Words in s. 528(5) renumbered as s. 528(5)(a) (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(4)(a) (with Sch. 7 para. 5)

F23 S. 528(5)(b) and word inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(4)(b) (with Sch. 7 para. 5)

F24 S. 528(5A) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(5) (with Sch. 7 para. 5)

F25 S. 528(5B)(5C) inserted (retrospectively) by Finance Act 2024 (c. 3), Sch. 7 para. 3(5)(6)

F26 S. 528(5D) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 7 para. 4(6) (with Sch. 7 para. 5)