Section 742 — Corporation Tax Act 2010: Abnormal dividends: the excessive accrual condition

Abnormal dividends: the excessive accrual condition 742 1 The excessive accrual condition is that the dividend substantially exceeds the amount which the recipient would have received if—

a the dividend had accrued from day to day, and b the recipient had been entitled to only so much of the dividend as accrued while the recipient held the securities.

2 But the excessive accrual condition is treated as not being met if during the period of 6 months beginning with the purchase of the securities the recipient does not—

a sell or otherwise dispose of any of the securities or any securities similar to them, or b acquire an option to sell any of the securities or any securities similar to them.

3 For the purposes of subsection (2) securities are taken to be similar if they entitle their holders—

a to the same rights against the same persons as to capital and interest, and b to the same remedies for the enforcement of those rights.

4 For the purposes of subsection (3) rights guaranteed by the Treasury are treated as rights against the Treasury.

5 Subsection (3) applies despite any differences—

a in the total nominal amounts of the respective securities, b in the form in which they are held, or c in the way in which they can be transferred.