Corporation Tax Act 2010

Meaning of “significant increase in the amount of a company’s capital”

688 Meaning of “significant increase in the amount of a company’s capital”

(1) This section and sections 689 to 691 have effect for determining whether, for the purposes of section 677(2), there is a significant increase in the amount of a company’s capital after a change in the ownership of the company.

(2) There is a significant increase in the amount of a company’s capital if amount B—

(a) exceeds amount A by at least £1 million, or

(b) is at least twice amount A.

(3) For the meaning of—

(a) “amount A” and “amount B”, see sections 689 and 690 respectively, and

(b) “amount of capital”, see section 691.

689 Amount A

(1) In section 688, amount A is the lower of—

(a) the amount of the company’s capital immediately before the change in ownership, and

(b) the highest 60 day minimum amount for the pre-change year.

(2) The highest 60 day minimum amount for the pre-change year is found as follows.

• Step 1

  Find the daily amounts of the company’s capital over the pre-change year.

• Step 2

  Take the highest of the daily amounts.

• Step 3

  Find out whether there was in the pre-change year a period of at least 60 days in which there was no daily amount lower than the amount taken.

• Step 4

  If there was, the amount taken is the highest 60 day minimum amount for the pre-change year.

  If there was not, take the next highest of the daily amounts and repeat step 3; and so on, until the highest 60 day minimum amount for the pre-change year is found.

(3) In this section “the pre-change year” means the period of one year ending immediately before the change in ownership.

690 Amount B

(1) In section 688, amount B is the highest 60 day minimum amount for the post-change period.

(2) The highest 60 day minimum amount for the post-change period is found as follows.

• Step 1

  Find the daily amounts of the company’s capital over the post-change period.

• Step 2

  Take the highest of the daily amounts.

• Step 3

  Find out whether there was in the post-change period a period of at least 60 days in which there was no daily amount lower than the amount taken.

• Step 4

  If there was, the amount taken is the highest 60 day minimum amount for the post-change period.

  If there was not, take the next highest of the daily amounts and repeat step 3; and so on, until the highest 60 day minimum amount for the post-change period is found.

(3) In this section “the post-change period” means the period of 3 years beginning with the change in ownership.

691 Meaning of “amount of capital”

(1) This section applies for the purposes of sections 688 to 690.

(2) The amount of the capital of a company is the sum of—

(a) the amount of the paid up share capital of the company,

(b) the amount outstanding of any debts incurred by the company which are within section 453(2), and

(c) the amount outstanding of any redeemable loan capital issued by the company.

(3) For the purposes of subsection (2)—

(a) the amount of the paid up share capital includes any amount in the share premium account of the company, and

(b) the amount outstanding of any debts includes the amount of any interest due on the debts.

(4) Amounts of capital are to be expressed in sterling.

(5) In this section “share premium account” has the same meaning as in section 610 of the Companies Act 2006.