Corporation Tax Act 2010

Introduction

Part 5: Group relief

Chapter 5: Subsidiaries, groups and consortiums

Section 151: Meaning of “75% subsidiary” and “90% subsidiary”

594.This section explains what is meant by “75% subsidiary” and “90% subsidiary”. It is based on section 413 of ICTA.

595.Subsection (1) imports the definitions in Chapter 3 of Part 24 of this Act.

596.Subsection (2) includes the share capital of a registered industrial or provident society in “ordinary share capital”.

597.Subsection (3) excludes shares held as circulating capital by a company that deals in shares.

598.The section simplifies the rule in section 413(5) of ICTA by not dealing separately with indirect share holdings. If any of the companies in the ownership chain holds the relevant shares as circulating capital the chain is broken for the purposes of this section.

599.Subsection (4) introduces the additional tests for a company to be treated as a 75% subsidiary of another. They are that “equity holders” in the subsidiary must be beneficially entitled to:

• at least 75% of the subsidiary’s profits; and

• at least 75% of the subsidiary’s assets in a winding up.

600.The test for a “90% subsidiary” is in similar terms.

601.The detail of the rules about equity holders is set out in Chapter 6 of this Part of the Act.