Finance Act 1988

6 (1) In this Schedule “redeemable preference shares” means shares in a company which are described as such in the terms of their issue or which fulfil the condition in paragraph (a) below and either or both of the conditions in paragraphs (b) and (c) below—

(a) that, as against other shares in the company, they carry a preferential entitlement to a dividend or to any assets in a winding up or both;

(b) that, by virtue of the terms of their issue, the exercise of a right by any person or the existence of any arrangements, they are liable to be redeemed, cancelled or repaid, in whole or in part;

(c) that, by virtue of any arrangements—

(i) to which the company which issued the shares is a party, or

(ii) where that company and another company are linked companies at the time of the issue, to which that other company is a party,

the holder has a right to require another person to acquire the shares or is obliged in any circumstances to dispose of them or another person has a right or is in any circumstances obliged to acquire them;

and for the purposes of paragraph (a) above shares are to be treated as carrying a preferential entitlement to a dividend as against other shares if, by virtue of any arrangements, there are circumstances in which a minimum dividend will be payable on those shares but not on others.

(2) In this Schedule the expressions “reorganisation”, “original shares” and “new holding” have the meanings given by section 77 of the M1 Capital Gains Tax Act 1979 except that, in a case where sections 78 and 79 of that Act apply in circumstances other than a reorganisation (within the meaning of section 77 of that Act) by virtue of any other provision of Chapter II of Part IV of that Act (conversion of securities, company reconstructions and amalgamations etc.), those expressions shall be construed as they fall to be construed in sections 78 and 79 as they so apply.

(3) In this Schedule—

• “holding”, in relation to shares, means a number of shares which are to be regarded for the purposes of the Capital Gains Tax Act 1979 as indistinguishable parts of a single asset,

• “indexation allowance” has the same meaning as in Chapter III of Part III of the M2 Finance Act 1982, and

• “security” has the same meaning as in section 82 of the M3 Capital Gains Tax Act 1979.

Marginal Citations

M1 1979 c. 14.

M2 1982 c. 39.

M3 1979 c. 14.