On 21 May 2019, HMRC updated its guidance on the meaning of “ordinary share capital” in section 1119, Corporation Tax Act 2010, and section 989, Income Tax Act 2007, to reflect the coming into force of Companies Act 2006.

The updated guidance is largely the same in substance as its predecessor. However, the most significant changes include:

  • the inclusion of a table setting out HMRC’s views on whether various types of shares are likely to constitute ordinary share capital.  HMRC’s view seems to have changed in relation to fixed rate preference shares with rights in liquidation and preference shares with coupon compounding over time. Such categories are described in the guidance as “finely balanced” or “borderline” and fact dependent
  • the guidance on non-UK entities has been expanded to specifically include Scottish firms and to highlight the importance of dividing an entity into equity or ownership interests.  Additionally, consideration is given to the treatment of amounts subscribed as fixed capital analogous to share premium over nil nominal value share. 

The updated guidance is found at CTM00509 to CTM00516 of HMRC’s Company Taxation Manual, which can be viewed here.