Corporation Tax Act 2010

Introduction

Part 5: Group relief

Chapter 6: Equity holders and profits or assets available for distribution

Section 159: Use of relevant company’s assets

629.This section extends the meaning of “equity holder”. It is based on paragraph 1 of Schedule 18 to ICTA.

630.The section treats as an equity holder a person who provides money to a company so that it can acquire an asset which is used in a trade by the person who provided the money. The company claims capital allowances on the asset.

631.In this case the person who provides the money has an economic stake in the company, whose results depend on the profits of the trade in which the asset is used. And this is the case even if the money is provided by way of, say, restricted preference shares which would not otherwise count towards the investor’s stake in the company (see section 160).

632.Subsection (1) sets the scene, specifying the conditions to be met for the section to apply.

633.Subsection (2) is the main rule: the person who provides the money is treated an equity holder.

634.Subsection (3) sets out the capital allowances to which the company must be entitled if the section is to apply.

635.Subsection (4) excludes from the application of the section a normal commercial loan made in the course of a banking business. The exclusion applies only to the extent that the amount of the commercial loan exceeds the cost of the assets.