It has long been regarded that redeemable shares with no right to a dividend are "ordinary share capital" within the meaning of ITA 2007 (s989), and that redeemable shares with a right to a dividend at a fixed rate of 0% are not.

This was called into question by the decision of the First Tier Tribunal ("FTT") in the McQuillan hearing in 2016, which found that shares with no dividend rights could be said to have a right to a dividend at a fixed rate of 0%, and were not therefore ordinary share capital. 

What constitutes ordinary share capital is important for shareholders for a number of reasons, not least in understanding whether they qualify for Entrepreneurs' Relief ("ER"). In McQuillan, HMRC sought to deny a claim for ER by the McQuillans due to the presence a large number of redeemable shares with no dividend rights which significantly outnumbered their holding of ordinary shares, thereby reducing their shareholding below 5%

On appeal by HMRC, the Upper Tier Tribunal disagreed with the FTT, reaffirming the long held position that redeemable shares with no right to a dividend fall within the meaning of ordinary share capital.