Corporation Tax Act 2009

527 The increasing value condition

(1) The increasing value condition is that the assets of the issuing company are of such a nature that the fair value of the share—

(a) is likely to increase at a rate which represents a return on an investment of money at a commercial rate of interest, and

(b) is unlikely to deviate to a substantial extent from that rate of increase.

(2) Fluctuations in value resulting from changes in exchange rates are ignored for the purposes of subsection (1).

(3) The increasing value condition is not met if—

(a) the whole of the assets of the issuing company are income-producing (see subsection (4)), or

(b) substantially the whole of them are income-producing on the basis of a calculation of their fair value.

(4) The assets which are “income-producing” for the purposes of this section are—

(a) any share to which section 524 applies,

(b) any share as respects which the increasing value condition is met or would be met apart from subsection (3),

(c) any share as respects which the condition in section 529(1)(b) is met,

(d) any share as respects which the associated transactions condition is met,

(e) any asset of a description specified in any paragraph of section 494(1) (meaning of “qualifying investments”),

(f) rights under a creditor repo within the meaning of section 543,

(g) any share in a company—

(i) the whole of whose assets are assets within paragraphs (a) to (f), or

(ii) substantially the whole of whose assets are such assets on the basis of a calculation of their fair value.

(5) For the purposes of subsection (1), it is assumed that no transaction (or series of transactions) intended to prevent either of the conditions in subsection (1) from being met will be or has been entered into.