http://www.legislation.gov.uk/ukpga/2009/10/schedule/24/paragraph/4Finance Act 2009An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.texttext/xmlenStatute Law Database2024-06-11Expert Participation2024-05-24SCHEDULESSCHEDULE 24Disguised interestAmendments of Part 6 of CTA 20094

After Chapter 6 insert—

Chapter 6AShares accounted for as liabilities

521AIntroduction to Chapter1

This Chapter contains rules for Part 5 (and the other provisions of the Corporation Tax Acts) to apply in some cases as if at some times in the accounting period of a company (“A”) which holds shares of a certain kind in another company (“B”) the shares were rights under a creditor relationship of A.

2

See, in particular—

a

section 521B (application of Part 5 to some shares as rights under creditor relationship), and

b

section 521C (which describes the shares to which the rules apply).

3

In this Chapter references to the investing company are to A and references to the issuing company are to B.

4

For the purposes of this Chapter, the definition of “share” in section 476(1) only applies so far as it provides that “share” does not include a share in a building society.

5

Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this Chapter.

6

See section 116B of TCGA 1992 for the effect for chargeable gains purposes of shares beginning or ceasing to be shares to which section 521C applies.

521BApplication of Part 5 to certain shares as rights under creditor relationship1

This section applies in relation to the times in a company's accounting period when—

a

the company holds a share in another company, and

b

section 521C (shares accounted for as liabilities) applies to the share.

2

Part 5 (and the other provisions of the Corporation Tax Acts) apply as if at those times—

a

the share were rights under a creditor relationship of the investing company, and

b

any distribution in respect of the share were not a distribution (and accordingly is within Part 5).

3

Where Part 5 applies in relation to the investing company in accordance with subsection (2) it so applies as if the issuing company stood in the position of debtor as respects the debt in question.

4

No debits are to be brought into account by the investing company as respects the share but this does not affect debits to be brought into account in respect of exchange gains or losses.

5

Subsection (2)(b) does not affect the operation of Part 1 of Schedule 25 of ICTA (controlled foreign companies: acceptable distribution policy) (including as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009).

6

In this Chapter references to “the share” are to the share mentioned in subsection (1).

521CShares accounted for as liabilities1

This section applies to the share if—

a

the share would be accounted for by the issuing company as a liability in accordance with generally accepted accounting practice,

b

the share produces for the investing company a return in relation to any amount which is economically equivalent to interest,

c

the issuing company and the investing company are not connected companies,

d

the condition in subsection (4) is met,

e

the share is not an excepted share (see section 521D), and

f

the investing company holds the share for an unallowable purpose (see section 521E).

2

For the purposes of this section a return produced for a company by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)—

a

it is reasonable to assume that it is a return by reference to the time value of that amount of money,

b

it is at a rate reasonably comparable to what is (in all the circumstances) a commercial rate of interest, and

c

at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it.

3

In subsection (2)(c) “the relevant time” means the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company.

4

The condition mentioned in subsection (1)(d) is that the share does not fall to be treated for the accounting period in question as if it were rights under a creditor relationship of the investing company because of section 490 (holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights).

5

Section 466 (companies connected for an accounting period) applies for the purposes of this section.

521DExcepted shares1

A share is an excepted share for the purposes of section 521C if it is—

a

a qualifying publicly-issued share (see subsection (2)), or

b

a share which mirrors a public issue (see subsections (3) and (4)).

2

A share is a “qualifying publicly-issued share” if—

a

it was issued by a company as part of an issue of shares to persons not connected with the company, and

b

less than 10% of the shares in that issue are held by the investing company or persons connected with it.

3

The first case where shares (“the mirroring shares”) mirror a public issue is where—

a

a company (“company A”) issues shares (“the public issue”) to persons not connected with the company,

b

within 7 days of that issue, one or more other companies (“companies BB”) issue the mirroring shares to company A on the same terms as the public issue or substantially the same terms,

c

company A and companies BB are associated companies (see subsection (5)), and

d

the total nominal value of the mirroring shares does not exceed the nominal value of the public issue.

4

The second case where shares (“the second level mirroring shares”) mirror a public issue is where, in the circumstances of the first case—

a

within 7 days of the public issue, one or more other companies (“companies CC”) issue the second level mirroring shares to one or more of companies BB on the same terms as the public issue or substantially the same terms,

b

company A, companies BB and companies CC are associated companies (see subsection (5)), and

c

the total nominal value of the second-level mirroring shares does not exceed the nominal value of the public issue.

5

For the purposes of subsections (3) and (4) companies are associated companies if they are members of the same group of companies for the purposes of Chapter 4 of Part 10 of ICTA (group relief) (see section 413(3)(a) of that Act).

521EUnallowable purpose1

For the purposes of section 521C, the investing company holds the share for an unallowable purpose if the main purpose, or one of the main purposes for which the company holds the share is to obtain a relevant tax advantage.

2

But the investing company may elect that this Chapter is to apply in relation to the share even though it would otherwise be prevented from applying by subsection (1)(f) of that section.

3

An election under subsection (2)—

a

must be made no later than the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company, and

b

is irrevocable.

4

In this section “obtain a relevant tax advantage” means secure that the return produced by the share (or any part of it) is received in a way that means that its treatment for corporation tax purpose is more advantageous to the investing company than it would be if it were—

a

charged to corporation tax as income of the investing company, or

b

brought into account as income of the investing company for corporation tax purposes,

at the time when amounts would be brought into account in relation to the return in accordance with section 521B.

5

Nothing in this section applies in relation to the investing company for an accounting period if it is an excluded controlled foreign company.

6

For this purpose the investing company is an excluded controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)—

a

are apportioned for the accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or

b

are not so apportioned because of section 748(1) of that Act.

521FShares becoming or ceasing to be shares to which section 521B applies1

This section applies if at any time section 521B begins or ceases to apply in the case of a share held by the investing company.

2

The investing company is treated for the purposes of Part 5—

a

as having disposed of the share immediately before that time for consideration of an amount equal to the notional carrying value of the share at that time, and

b

as having immediately reacquired it for consideration of the same amount.

3

In subsection (2) “notional carrying value”, in relation to the share, means the amount which would have been its carrying value in the accounts of the investing company if a period of account had ended immediately before section 521B began or ceased to apply in the case of the share and the investing company.

4

For the purposes of subsection (3) “carrying value” has the same meaning as it has for the purposes of section 316 (see section 317).

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<ukm:Section Ref="schedule-53" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/53">Sch. 53 </ukm:Section>
<ukm:Section Ref="schedule-53-paragraph-11A" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/53/paragraph/11A" FoundRef="schedule-53">para. 11A</ukm:Section>
<ukm:Section Ref="schedule-53-paragraph-11B" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/53/paragraph/11B" FoundRef="schedule-53">11B</ukm:Section>
and cross-heading
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance (No. 3) Act 2010</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-9" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9">Sch. 9 </ukm:Section>
<ukm:Section Ref="schedule-9-paragraph-17" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9/paragraph/17">para. 17</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="section-25-2" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/section/25/2">s. 25(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Prospective="true" Qualification=""/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
<ukm:UnappliedEffect AffectingNumber="33" AffectingClass="UnitedKingdomPublicGeneralAct" AffectingURI="http://www.legislation.gov.uk/id/ukpga/2010/33" Type="inserted" AffectingYear="2010" EffectId="key-4689d474d569f2aa30d1b479bc2fe2a8" URI="http://www.legislation.gov.uk/id/effect/key-4689d474d569f2aa30d1b479bc2fe2a8" AffectedNumber="10" Row="359" AffectingEffectsExtent="E+W+S+N.I." AffectedYear="2009" AffectedProvisions="Sch. 53 para. 14A and cross-heading" Modified="2024-06-12T08:34:36Z" RequiresApplied="true" AffectingProvisions="Sch. 9 para. 18" AffectedURI="http://www.legislation.gov.uk/id/ukpga/2009/10" AffectedClass="UnitedKingdomPublicGeneralAct">
<ukm:AffectedTitle>Finance Act 2009</ukm:AffectedTitle>
<ukm:AffectedProvisions>
<ukm:Section Ref="schedule-53" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/53">Sch. 53 </ukm:Section>
<ukm:Section Ref="schedule-53-paragraph-14A" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/53/paragraph/14A" FoundRef="schedule-53">para. 14A</ukm:Section>
and cross-heading
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance (No. 3) Act 2010</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-9" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9">Sch. 9 </ukm:Section>
<ukm:Section Ref="schedule-9-paragraph-18" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9/paragraph/18">para. 18</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="section-25-2" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/section/25/2">s. 25(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Prospective="true" Qualification=""/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
<ukm:UnappliedEffect Notes="Sch. 54 para. 9B is amended before it comes into force by 2016 c. 24, Sch. 1 para. 66(5)" AffectedProvisions="Sch. 54 para. 9B 9C and cross-heading" AffectingURI="http://www.legislation.gov.uk/id/ukpga/2010/33" AffectedYear="2009" AffectedURI="http://www.legislation.gov.uk/id/ukpga/2009/10" AffectedClass="UnitedKingdomPublicGeneralAct" Modified="2024-06-12T08:34:36Z" Comments="Sch. 54 para. 9B is amended before it comes into force by 2016 c. 24, Sch. 1 para. 66(5): "(5)In paragraph 9B of Schedule 54 (repayment interest start date: companies: income tax and certain tax credits)- (a)in sub-paragraph (1) omit paragraph (b) (tax credit comprised in franked investment income), and the "and" preceding it, and (b)in sub-paragraph (2)- (i) omit "or payment", and (ii) omit "or the franked investment income mentioned in sub-paragraph (1)(b)"." Editor: please include these amendments when the insertion finally comes into force." AffectingEffectsExtent="E+W+S+N.I." AffectingYear="2010" AffectingProvisions="Sch. 9 para. 11" Row="388" Type="inserted" RequiresApplied="true" AffectedNumber="10" AffectingNumber="33" EffectId="key-5ffba95ed3a226a06f769630a7c9a965" AffectingClass="UnitedKingdomPublicGeneralAct" AppendedCommentary="(as amended by 2016 c. 24, Sch. 1 paras. 66(5), 73)" URI="http://www.legislation.gov.uk/id/effect/key-5ffba95ed3a226a06f769630a7c9a965">
<ukm:AffectedTitle>Finance Act 2009</ukm:AffectedTitle>
<ukm:AffectedProvisions>
<ukm:Section Ref="schedule-54" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54">Sch. 54 </ukm:Section>
<ukm:Section Ref="schedule-54-paragraph-9B" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54/paragraph/9B" FoundRef="schedule-54">para. 9B</ukm:Section>
<ukm:Section Ref="schedule-54-paragraph-9C" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54/paragraph/9C" FoundRef="schedule-54">9C</ukm:Section>
and cross-heading
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance (No. 3) Act 2010</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-9" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9">Sch. 9 </ukm:Section>
<ukm:Section Ref="schedule-9-paragraph-11" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9/paragraph/11">para. 11</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="section-25-2" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/section/25/2">s. 25(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Prospective="true" Qualification=""/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
<ukm:UnappliedEffect AffectingEffectsExtent="E+W+S+N.I." AffectedURI="http://www.legislation.gov.uk/id/ukpga/2009/10" Modified="2024-06-12T08:34:36Z" AffectingYear="2010" URI="http://www.legislation.gov.uk/id/effect/key-da77192c4785f4f4200e19e7bebd12a4" Row="390" Type="inserted" AffectingProvisions="Sch. 9 para. 19" RequiresApplied="true" AffectingNumber="33" AffectedProvisions="Sch. 54 para. 12A 12B and cross-heading" AffectingClass="UnitedKingdomPublicGeneralAct" AffectedYear="2009" EffectId="key-da77192c4785f4f4200e19e7bebd12a4" AffectingURI="http://www.legislation.gov.uk/id/ukpga/2010/33" AffectedNumber="10" AffectedClass="UnitedKingdomPublicGeneralAct">
<ukm:AffectedTitle>Finance Act 2009</ukm:AffectedTitle>
<ukm:AffectedProvisions>
<ukm:Section Ref="schedule-54" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54">Sch. 54 </ukm:Section>
<ukm:Section Ref="schedule-54-paragraph-12A" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54/paragraph/12A" FoundRef="schedule-54">para. 12A</ukm:Section>
<ukm:Section Ref="schedule-54-paragraph-12B" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54/paragraph/12B" FoundRef="schedule-54">12B</ukm:Section>
and cross-heading
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance (No. 3) Act 2010</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-9" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9">Sch. 9 </ukm:Section>
<ukm:Section Ref="schedule-9-paragraph-19" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9/paragraph/19">para. 19</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="section-25-2" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/section/25/2">s. 25(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Prospective="true" Qualification=""/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
<ukm:UnappliedEffect AffectingClass="UnitedKingdomPublicGeneralAct" AffectingURI="http://www.legislation.gov.uk/id/ukpga/2010/33" AffectedClass="UnitedKingdomPublicGeneralAct" EffectId="key-f0e5a9cb0a1fc4200590ad2086c7a35d" AffectedYear="2009" AffectedNumber="10" Modified="2024-06-12T08:34:36Z" AffectingEffectsExtent="E+W+S+N.I." AffectedURI="http://www.legislation.gov.uk/id/ukpga/2009/10" Type="inserted" Notes="Sch. 9 para. 10 is amended before it comes into force by 2017 c. 32, Sch. 4 para. 182" AffectedProvisions="Sch. 54 Pt. A1" Comments="The amending provision is itself amended before it comes into force by 2017 c. 32, Sch. 4 para. 182: "(1) In paragraph 10 of Schedule 9 to F(No.3)A 2010 (interest), the new Part A1 to be inserted into Schedule 54 to FA 2009 is amended as follows. (2) In paragraph A1 (interest on tax repaid as a result of carrying back a non-trading deficit on company's loan relationships)- (a) in sub-paragraph (1)(c) for "or 459(1)(b)" substitute " , 459(1)(b) or 463B(1)(b) ", and (b) in sub-paragraph (2) for "or 459(1)(b)" substitute " , 459(1)(b) or 463B(1)(b) ". (3) After paragraph A2 insert- "A2A(1)This paragraph applies where- (a)a company has profits arising in an accounting period ("the earlier period"), (b)the company ceases to carry on a trade in a later accounting period ("the later period"), (c)on a claim under section 45F of CTA 2010 (terminal losses), the whole or any part of a loss incurred in the trade has been set off for the purposes of corporation tax against the profits of the earlier period, (d)the earlier period does not fall wholly within the period of 12 months immediately preceding the later period, and (e)a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that period. (2) So much of the repayment mentioned in sub-paragraph (1)(e) as falls to be made as a result of the claim under section 45F does not carry repayment interest. (3) But sub-paragraph (2) does not apply (and, accordingly, the amount mentioned in that sub-paragraph carries repayment interest) after the expiry of 9 months from the end of the later period." (4)In paragraph A3 (interest on tax repaid as a result of a claim under section 77 of TIOPA 2010) in sub-paragraph (4) after "A4" insert " or A5 ". (5)After paragraph A4 insert- "A5(1)This paragraph applies where- (a)a company has profits arising in an accounting period ("the middle period"), (b)the company ceases to carry on a trade in a later accounting period ("the later period"), (c)on a claim under section 45F of CTA 2010 (terminal losses), the whole or any part of a loss incurred in the trade has been set off for the purposes of corporation tax against the profits of the middle period, (d)the middle period does not fall wholly within the period of 12 months immediately preceding the later period, (e)as a result of the claim under section 45F, an excess or increased excess arises in the middle period as described in section 72 of TIOPA 2010 (amounts of unrelieved foreign tax), (f)on a claim under section 77 of that Act, credit for the whole or any part of the excess is allowed against corporation tax in respect of an accounting period before the middle period ("the earlier period") and, (g)a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that period. (2)So much of the repayment mentioned in sub-paragraph (1)(g) as falls to be made as a result of the claim under section 77 does not carry repayment interest. (3)But sub-paragraph (2) does not apply (and, accordingly, the amount mentioned in that sub-paragraph carries repayment interest) after the expiry of 9 months from the end of the later period.""" AppendedCommentary="(as amended by 2017 c. 32, s. 25(2), Sch. 4 paras. 182, 190)" URI="http://www.legislation.gov.uk/id/effect/key-f0e5a9cb0a1fc4200590ad2086c7a35d" Row="399" AffectingYear="2010" RequiresApplied="true" AffectingProvisions="Sch. 9 para. 10" AffectingNumber="33">
<ukm:AffectedTitle>Finance Act 2009</ukm:AffectedTitle>
<ukm:AffectedProvisions>
<ukm:Section Ref="schedule-54" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54">Sch. 54 </ukm:Section>
<ukm:Section Ref="schedule-54-part-A1" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54/part/A1" FoundRef="schedule-54">Pt. A1</ukm:Section>
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance (No. 3) Act 2010</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-9" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9">Sch. 9 </ukm:Section>
<ukm:Section Ref="schedule-9-paragraph-10" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/schedule/9/paragraph/10">para. 10</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="section-25-2" URI="http://www.legislation.gov.uk/id/ukpga/2010/33/section/25/2">s. 25(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Prospective="true" Qualification=""/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
<ukm:UnappliedEffect AffectingURI="http://www.legislation.gov.uk/id/ukpga/2015/11" AffectedExtent="E+W+S+N.I." AffectingNumber="11" AffectedURI="http://www.legislation.gov.uk/id/ukpga/2009/10" RequiresApplied="true" URI="http://www.legislation.gov.uk/id/effect/key-23835046e889403fbc6413d2b66fc80d" AffectingYear="2015" AffectingProvisions="Sch. 20 para. 15(2)(a)" AffectingEffectsExtent="E+W+S+N.I." Modified="2024-06-12T08:34:36Z" Type="inserted" AffectingClass="UnitedKingdomPublicGeneralAct" AffectedProvisions="Sch. 55 para. 6(3A)(za)" AffectedNumber="10" AffectedYear="2009" AffectedClass="UnitedKingdomPublicGeneralAct" EffectId="key-23835046e889403fbc6413d2b66fc80d" Row="498">
<ukm:AffectedTitle>Finance Act 2009</ukm:AffectedTitle>
<ukm:AffectedProvisions>
<ukm:Section Ref="schedule-55" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/55">Sch. 55 </ukm:Section>
<ukm:Section Ref="schedule-55-paragraph-6-3A-za" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/55/paragraph/6/3A/za" FoundRef="schedule-55-paragraph-6">para. 6(3A)(za)</ukm:Section>
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance Act 2015</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-20" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/schedule/20">Sch. 20 </ukm:Section>
<ukm:Section Ref="schedule-20-paragraph-15-2-a" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/schedule/20/paragraph/15/2/a">para. 15(2)(a)</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="section-120-2" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/section/120/2">s. 120(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Prospective="true" Qualification=""/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
<ukm:UnappliedEffect URI="http://www.legislation.gov.uk/id/effect/key-c441868579da3af2981f4d658efb27b5" Modified="2024-06-12T08:34:36Z" AffectingProvisions="Sch. 20 para. 15(3)(a)" AffectedExtent="E+W+S+N.I." AffectingYear="2015" Type="inserted" AffectingEffectsExtent="E+W+S+N.I." AffectedYear="2009" RequiresApplied="true" AffectedNumber="10" Row="502" AffectingURI="http://www.legislation.gov.uk/id/ukpga/2015/11" EffectId="key-c441868579da3af2981f4d658efb27b5" AffectedProvisions="Sch. 55 para. 6(4A)(za)" AffectedURI="http://www.legislation.gov.uk/id/ukpga/2009/10" AffectingClass="UnitedKingdomPublicGeneralAct" AffectedClass="UnitedKingdomPublicGeneralAct" AffectingNumber="11">
<ukm:AffectedTitle>Finance Act 2009</ukm:AffectedTitle>
<ukm:AffectedProvisions>
<ukm:Section Ref="schedule-55" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/55">Sch. 55 </ukm:Section>
<ukm:Section Ref="schedule-55-paragraph-6-4A-za" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/55/paragraph/6/4A/za" FoundRef="schedule-55-paragraph-6">para. 6(4A)(za)</ukm:Section>
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance Act 2015</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-20" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/schedule/20">Sch. 20 </ukm:Section>
<ukm:Section Ref="schedule-20-paragraph-15-3-a" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/schedule/20/paragraph/15/3/a">para. 15(3)(a)</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="section-120-2" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/section/120/2">s. 120(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Prospective="true" Qualification=""/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
<ukm:UnappliedEffect Row="630" AffectingEffectsExtent="E+W+S+N.I." EffectId="key-4df15d08c2bfa3fa5ebb033e8c03b8f4" Type="inserted" AffectedYear="2009" AffectedProvisions="Sch. 55 para. 17(4)(ba)" AffectedExtent="E+W+S+N.I." AffectingClass="UnitedKingdomPublicGeneralAct" Modified="2024-06-12T08:34:36Z" AffectedClass="UnitedKingdomPublicGeneralAct" RequiresApplied="true" AffectedNumber="10" AffectedURI="http://www.legislation.gov.uk/id/ukpga/2009/10" URI="http://www.legislation.gov.uk/id/effect/key-4df15d08c2bfa3fa5ebb033e8c03b8f4" AffectingYear="2015" AffectingProvisions="Sch. 20 para. 19" AffectingURI="http://www.legislation.gov.uk/id/ukpga/2015/11" AffectingNumber="11">
<ukm:AffectedTitle>Finance Act 2009</ukm:AffectedTitle>
<ukm:AffectedProvisions>
<ukm:Section Ref="schedule-55" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/55">Sch. 55 </ukm:Section>
<ukm:Section Ref="schedule-55-paragraph-17-4-ba" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/55/paragraph/17/4/ba" FoundRef="schedule-55-paragraph-17">para. 17(4)(ba)</ukm:Section>
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance Act 2015</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-20" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/schedule/20">Sch. 20 </ukm:Section>
<ukm:Section Ref="schedule-20-paragraph-19" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/schedule/20/paragraph/19">para. 19</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="section-120-2" URI="http://www.legislation.gov.uk/id/ukpga/2015/11/section/120/2">s. 120(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Prospective="true" Qualification=""/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
<ukm:UnappliedEffect URI="http://www.legislation.gov.uk/id/effect/key-02320d0d43f3ae909df3dff8e42496cf" RequiresApplied="true" AffectedURI="http://www.legislation.gov.uk/id/ukpga/2009/10" AffectingProvisions="Sch. 2 para. 13" Row="311" Modified="2024-10-29T07:48:20Z" Type="omitted" AffectedProvisions="Sch. 54A para. 2(e)-(g)" EffectId="key-02320d0d43f3ae909df3dff8e42496cf" AffectingClass="UnitedKingdomPublicGeneralAct" AffectingURI="http://www.legislation.gov.uk/id/ukpga/2024/3" AffectingEffectsExtent="E+W+S+N.I." AffectingYear="2024" AffectedYear="2009" AffectedClass="UnitedKingdomPublicGeneralAct" AffectingNumber="3" AffectedNumber="10">
<ukm:AffectedTitle>Finance Act 2009</ukm:AffectedTitle>
<ukm:AffectedProvisions>
<ukm:Section Ref="schedule-54A" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54A">Sch. 54A </ukm:Section>
<ukm:SectionRange Start="schedule-54A-paragraph-2-e" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54A/paragraph/2/e" FoundStart="schedule-54A-paragraph-2" End="schedule-54A-paragraph-2-g" UpTo="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54A/paragraph/2/g" FoundEnd="schedule-54A-paragraph-2" MissingEnd="true">
<ukm:Section Ref="schedule-54A-paragraph-2-e" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54A/paragraph/2/e" FoundRef="schedule-54A-paragraph-2">para. 2(e)</ukm:Section>
-
<ukm:Section Ref="schedule-54A-paragraph-2-g" URI="http://www.legislation.gov.uk/id/ukpga/2009/10/schedule/54A/paragraph/2/g" FoundRef="schedule-54A-paragraph-2">(g)</ukm:Section>
</ukm:SectionRange>
</ukm:AffectedProvisions>
<ukm:AffectingTitle>Finance Act 2024</ukm:AffectingTitle>
<ukm:AffectingProvisions>
<ukm:Section Ref="schedule-2" URI="http://www.legislation.gov.uk/id/ukpga/2024/3/schedule/2">Sch. 2 </ukm:Section>
<ukm:Section Ref="schedule-2-paragraph-13" URI="http://www.legislation.gov.uk/id/ukpga/2024/3/schedule/2/paragraph/13">para. 13</ukm:Section>
</ukm:AffectingProvisions>
<ukm:CommencementAuthority>
<ukm:Section Ref="schedule-2" URI="http://www.legislation.gov.uk/id/ukpga/2024/3/schedule/2">Sch. 2 </ukm:Section>
<ukm:Section Ref="schedule-2-paragraph-16-2" URI="http://www.legislation.gov.uk/id/ukpga/2024/3/schedule/2/paragraph/16/2">para. 16(2)</ukm:Section>
</ukm:CommencementAuthority>
<ukm:InForceDates>
<ukm:InForce Applied="false" Date="2027-04-01" Qualification="Other" OtherQualification="in relation to accounting periods beginning on or after that date"/>
</ukm:InForceDates>
</ukm:UnappliedEffect>
</ukm:UnappliedEffects>
</ukm:PrimaryMetadata>
<ukm:Notes>
<ukm:Note IdURI="http://www.legislation.gov.uk/id/ukpga/2009/10/notes"/>
<ukm:Alternatives>
<ukm:Alternative Date="2009-08-03" URI="http://www.legislation.gov.uk/ukpga/2009/10/pdfs/ukpgaen_20090010_en.pdf" Title="Explanatory Note"/>
</ukm:Alternatives>
</ukm:Notes>
<ukm:CorrectionSlips>
<ukm:CorrectionSlip URI="http://www.legislation.gov.uk/ukpga/2009/10/pdfs/ukpgacs_20090010_en.pdf" Date="2010-10-15" Title="Correction Slip" Size="14780"/>
</ukm:CorrectionSlips>
<ukm:Alternatives>
<ukm:Alternative Date="2009-07-22" URI="http://www.legislation.gov.uk/ukpga/2009/10/pdfs/ukpga_20090010_en.pdf" Title="Print Version"/>
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<portionBody>
<hcontainer name="schedules" eId="d4e335" period="#period3">
<heading>SCHEDULES</heading>
<hcontainer name="schedule" eId="schedule-24" period="#period2">
<num>SCHEDULE 24</num>
<heading>Disguised interest</heading>
<hcontainer name="crossheading" eId="schedule-24-crossheading-amendments-of-part-6-of-cta-2009" period="#period1">
<heading>
<em>Amendments of Part 6 of CTA 2009</em>
</heading>
<paragraph eId="schedule-24-paragraph-4" period="#period1">
<num>4</num>
<content>
<p>After Chapter 6 insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="unknown unknown unknown default" startQuote="" endQuote="">
<chapter eId="d4e356">
<num>Chapter 6A</num>
<heading>Shares accounted for as liabilities</heading>
<section eId="d4e364">
<num>521A</num>
<heading>Introduction to Chapter</heading>
<subsection eId="d4e368">
<num>1</num>
<content>
<p>This Chapter contains rules for Part 5 (and the other provisions of the Corporation Tax Acts) to apply in some cases as if at some times in the accounting period of a company (“A”) which holds shares of a certain kind in another company (“B”) the shares were rights under a creditor relationship of A.</p>
</content>
</subsection>
<subsection eId="d4e374">
<num>2</num>
<intro>
<p>See, in particular—</p>
</intro>
<paragraph eId="d4e380">
<num>a</num>
<content>
<p>section 521B (application of Part 5 to some shares as rights under creditor relationship), and</p>
</content>
</paragraph>
<paragraph eId="d4e386">
<num>b</num>
<content>
<p>section 521C (which describes the shares to which the rules apply).</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e392">
<num>3</num>
<content>
<p>In this Chapter references to the investing company are to A and references to the issuing company are to B.</p>
</content>
</subsection>
<subsection eId="d4e398">
<num>4</num>
<content>
<p>
For the purposes of this Chapter, the definition of “share” in section 476(1) only applies so far as it provides that “
<term refersTo="#term-share">share</term>
” does not include a share in a building society.
</p>
</content>
</subsection>
<subsection eId="d4e407">
<num>5</num>
<content>
<p>Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this Chapter.</p>
</content>
</subsection>
<subsection eId="d4e413">
<num>6</num>
<content>
<p>
See section 116B of
<abbr class="Acronym" title="Taxation of Chargeable Gains Act">TCGA</abbr>
1992 for the effect for chargeable gains purposes of shares beginning or ceasing to be shares to which section 521C applies.
</p>
</content>
</subsection>
</section>
<section eId="d4e425">
<num>521B</num>
<heading>Application of Part 5 to certain shares as rights under creditor relationship</heading>
<subsection eId="d4e429">
<num>1</num>
<intro>
<p>This section applies in relation to the times in a company's accounting period when—</p>
</intro>
<paragraph eId="d4e435">
<num>a</num>
<content>
<p>the company holds a share in another company, and</p>
</content>
</paragraph>
<paragraph eId="d4e441">
<num>b</num>
<content>
<p>section 521C (shares accounted for as liabilities) applies to the share.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e447">
<num>2</num>
<intro>
<p>Part 5 (and the other provisions of the Corporation Tax Acts) apply as if at those times—</p>
</intro>
<paragraph eId="d4e453">
<num>a</num>
<content>
<p>the share were rights under a creditor relationship of the investing company, and</p>
</content>
</paragraph>
<paragraph eId="d4e459">
<num>b</num>
<content>
<p>any distribution in respect of the share were not a distribution (and accordingly is within Part 5).</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e465">
<num>3</num>
<content>
<p>Where Part 5 applies in relation to the investing company in accordance with subsection (2) it so applies as if the issuing company stood in the position of debtor as respects the debt in question.</p>
</content>
</subsection>
<subsection eId="d4e471">
<num>4</num>
<content>
<p>No debits are to be brought into account by the investing company as respects the share but this does not affect debits to be brought into account in respect of exchange gains or losses.</p>
</content>
</subsection>
<subsection eId="d4e477">
<num>5</num>
<content>
<p>
Subsection (2)(b) does not affect the operation of Part 1 of Schedule 25 of
<abbr class="Acronym" title="Income and Corporation Taxes Act">ICTA</abbr>
(controlled foreign companies: acceptable distribution policy) (including as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009).
</p>
</content>
</subsection>
<subsection eId="d4e486">
<num>6</num>
<content>
<p>In this Chapter references to “the share” are to the share mentioned in subsection (1).</p>
</content>
</subsection>
</section>
<section eId="d4e495">
<num>521C</num>
<heading>Shares accounted for as liabilities</heading>
<subsection eId="d4e499">
<num>1</num>
<intro>
<p>This section applies to the share if—</p>
</intro>
<paragraph eId="d4e505">
<num>a</num>
<content>
<p>the share would be accounted for by the issuing company as a liability in accordance with generally accepted accounting practice,</p>
</content>
</paragraph>
<paragraph eId="d4e511">
<num>b</num>
<content>
<p>the share produces for the investing company a return in relation to any amount which is economically equivalent to interest,</p>
</content>
</paragraph>
<paragraph eId="d4e517">
<num>c</num>
<content>
<p>the issuing company and the investing company are not connected companies,</p>
</content>
</paragraph>
<paragraph eId="d4e523">
<num>d</num>
<content>
<p>the condition in subsection (4) is met,</p>
</content>
</paragraph>
<paragraph eId="d4e529">
<num>e</num>
<content>
<p>the share is not an excepted share (see section 521D), and</p>
</content>
</paragraph>
<paragraph eId="d4e535">
<num>f</num>
<content>
<p>the investing company holds the share for an unallowable purpose (see section 521E).</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e541">
<num>2</num>
<intro>
<p>For the purposes of this section a return produced for a company by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)—</p>
</intro>
<paragraph eId="d4e547">
<num>a</num>
<content>
<p>it is reasonable to assume that it is a return by reference to the time value of that amount of money,</p>
</content>
</paragraph>
<paragraph eId="d4e553">
<num>b</num>
<content>
<p>it is at a rate reasonably comparable to what is (in all the circumstances) a commercial rate of interest, and</p>
</content>
</paragraph>
<paragraph eId="d4e559">
<num>c</num>
<content>
<p>at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e565">
<num>3</num>
<content>
<p>
In subsection (2)(c) “
<term refersTo="#term-the-relevant-time">the relevant time</term>
” means the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company.
</p>
</content>
</subsection>
<subsection eId="d4e574">
<num>4</num>
<content>
<p>The condition mentioned in subsection (1)(d) is that the share does not fall to be treated for the accounting period in question as if it were rights under a creditor relationship of the investing company because of section 490 (holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights).</p>
</content>
</subsection>
<subsection eId="d4e580">
<num>5</num>
<content>
<p>Section 466 (companies connected for an accounting period) applies for the purposes of this section.</p>
</content>
</subsection>
</section>
<section eId="d4e589">
<num>521D</num>
<heading>Excepted shares</heading>
<subsection eId="d4e593">
<num>1</num>
<intro>
<p>A share is an excepted share for the purposes of section 521C if it is—</p>
</intro>
<paragraph eId="d4e599">
<num>a</num>
<content>
<p>a qualifying publicly-issued share (see subsection (2)), or</p>
</content>
</paragraph>
<paragraph eId="d4e605">
<num>b</num>
<content>
<p>a share which mirrors a public issue (see subsections (3) and (4)).</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e611">
<num>2</num>
<intro>
<p>A share is a “qualifying publicly-issued share” if—</p>
</intro>
<paragraph eId="d4e617">
<num>a</num>
<content>
<p>it was issued by a company as part of an issue of shares to persons not connected with the company, and</p>
</content>
</paragraph>
<paragraph eId="d4e623">
<num>b</num>
<content>
<p>less than 10% of the shares in that issue are held by the investing company or persons connected with it.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e629">
<num>3</num>
<intro>
<p>The first case where shares (“the mirroring shares”) mirror a public issue is where—</p>
</intro>
<paragraph eId="d4e635">
<num>a</num>
<content>
<p>a company (“company A”) issues shares (“the public issue”) to persons not connected with the company,</p>
</content>
</paragraph>
<paragraph eId="d4e641">
<num>b</num>
<content>
<p>within 7 days of that issue, one or more other companies (“companies BB”) issue the mirroring shares to company A on the same terms as the public issue or substantially the same terms,</p>
</content>
</paragraph>
<paragraph eId="d4e647">
<num>c</num>
<content>
<p>company A and companies BB are associated companies (see subsection (5)), and</p>
</content>
</paragraph>
<paragraph eId="d4e653">
<num>d</num>
<content>
<p>the total nominal value of the mirroring shares does not exceed the nominal value of the public issue.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e659">
<num>4</num>
<intro>
<p>The second case where shares (“the second level mirroring shares”) mirror a public issue is where, in the circumstances of the first case—</p>
</intro>
<paragraph eId="d4e665">
<num>a</num>
<content>
<p>within 7 days of the public issue, one or more other companies (“companies CC”) issue the second level mirroring shares to one or more of companies BB on the same terms as the public issue or substantially the same terms,</p>
</content>
</paragraph>
<paragraph eId="d4e671">
<num>b</num>
<content>
<p>company A, companies BB and companies CC are associated companies (see subsection (5)), and</p>
</content>
</paragraph>
<paragraph eId="d4e677">
<num>c</num>
<content>
<p>the total nominal value of the second-level mirroring shares does not exceed the nominal value of the public issue.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e683">
<num>5</num>
<content>
<p>
For the purposes of subsections (3) and (4) companies are associated companies if they are members of the same group of companies for the purposes of Chapter 4 of Part 10 of
<abbr class="Acronym" title="Income and Corporation Taxes Act">ICTA</abbr>
(group relief) (see section 413(3)(a) of that Act).
</p>
</content>
</subsection>
</section>
<section eId="d4e695">
<num>521E</num>
<heading>Unallowable purpose</heading>
<subsection eId="d4e699">
<num>1</num>
<content>
<p>For the purposes of section 521C, the investing company holds the share for an unallowable purpose if the main purpose, or one of the main purposes for which the company holds the share is to obtain a relevant tax advantage.</p>
</content>
</subsection>
<subsection eId="d4e705">
<num>2</num>
<content>
<p>But the investing company may elect that this Chapter is to apply in relation to the share even though it would otherwise be prevented from applying by subsection (1)(f) of that section.</p>
</content>
</subsection>
<subsection eId="d4e711">
<num>3</num>
<intro>
<p>An election under subsection (2)—</p>
</intro>
<paragraph eId="d4e717">
<num>a</num>
<content>
<p>must be made no later than the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company, and</p>
</content>
</paragraph>
<paragraph eId="d4e723">
<num>b</num>
<content>
<p>is irrevocable.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e729">
<num>4</num>
<intro>
<p>
In this section “
<term refersTo="#term-obtain-a-relevant-tax-advantage">obtain a relevant tax advantage</term>
” means secure that the return produced by the share (or any part of it) is received in a way that means that its treatment for corporation tax purpose is more advantageous to the investing company than it would be if it were—
</p>
</intro>
<paragraph eId="d4e738">
<num>a</num>
<content>
<p>charged to corporation tax as income of the investing company, or</p>
</content>
</paragraph>
<paragraph eId="d4e744">
<num>b</num>
<content>
<p>brought into account as income of the investing company for corporation tax purposes,</p>
</content>
</paragraph>
<wrapUp>
<p>at the time when amounts would be brought into account in relation to the return in accordance with section 521B.</p>
</wrapUp>
</subsection>
<subsection eId="d4e752">
<num>5</num>
<content>
<p>Nothing in this section applies in relation to the investing company for an accounting period if it is an excluded controlled foreign company.</p>
</content>
</subsection>
<subsection eId="d4e758">
<num>6</num>
<intro>
<p>
For this purpose the investing company is an excluded controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of
<abbr class="Acronym" title="Income and Corporation Taxes Act">ICTA</abbr>
)—
</p>
</intro>
<paragraph eId="d4e767">
<num>a</num>
<content>
<p>
are apportioned for the accounting period in accordance with section 752 of
<abbr class="Acronym" title="Income and Corporation Taxes Act">ICTA</abbr>
by virtue of section 747(3) of that Act, or
</p>
</content>
</paragraph>
<paragraph eId="d4e776">
<num>b</num>
<content>
<p>are not so apportioned because of section 748(1) of that Act.</p>
</content>
</paragraph>
</subsection>
</section>
<section eId="d4e785">
<num>521F</num>
<heading>Shares becoming or ceasing to be shares to which section 521B applies</heading>
<subsection eId="d4e789">
<num>1</num>
<content>
<p>This section applies if at any time section 521B begins or ceases to apply in the case of a share held by the investing company.</p>
</content>
</subsection>
<subsection eId="d4e795">
<num>2</num>
<intro>
<p>The investing company is treated for the purposes of Part 5—</p>
</intro>
<paragraph eId="d4e801">
<num>a</num>
<content>
<p>as having disposed of the share immediately before that time for consideration of an amount equal to the notional carrying value of the share at that time, and</p>
</content>
</paragraph>
<paragraph eId="d4e807">
<num>b</num>
<content>
<p>as having immediately reacquired it for consideration of the same amount.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e813">
<num>3</num>
<content>
<p>
In subsection (2) “
<term refersTo="#term-notional-carrying-value">notional carrying value</term>
”, in relation to the share, means the amount which would have been its carrying value in the accounts of the investing company if a period of account had ended immediately before section 521B began or ceased to apply in the case of the share and the investing company.
</p>
</content>
</subsection>
<subsection eId="d4e822">
<num>4</num>
<content>
<p>
For the purposes of subsection (3) “
<term refersTo="#term-carrying-value">carrying value</term>
” has the same meaning as it has for the purposes of section 316 (see section 317).
</p>
</content>
</subsection>
</section>
</chapter>
</quotedStructure>
</mod>
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