Income and Corporation Taxes Act 1988

293 Qualifying companies. U.K.

[F1 (1) Subject to section 294, a company is a qualifying company (whether it is resident in the United Kingdom or elsewhere) if it complies with the requirements of this section.

(2) The company must, throughout the relevant period, be an unquoted company and be—

(a) a company which exists wholly for the purpose of carrying on one or more qualifying trades or which so exists apart from purposes capable of having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities, or

[F2 (aa) the parent company of a trading group.]

(3) In this section “qualifying subsidiary”, in relation to a company, means a subsidiary of a kind which that company may hold by virtue of section 308.]

[F3 (3A) For the purposes of this section a company is the parent company of a trading group if—

(a) it has one or more subsidiaries;

(b) each of its subsidiaries is a qualifying subsidiary of the company; and

(c) the requirements of subsection (3B) below are fulfilled by what would be the business of the company and its subsidiaries if all the activities, taken together, of the company and its subsidiaries were regarded as one business.

(3B) A business fulfils the requirements of this subsection if neither the business nor a substantial part of it consists in, or in either of, the following, that is to say—

(a) activities falling within section 297(2)(a) to (g) but not within subsection (3C) below; and

(b) activities [F4 (other than research and development and oil exploration)] carried on otherwise than in the course of a trade.

(3C) The activities falling within this subsection are—

(a) the receiving of royalties or licence fees in circumstances where [F5 the requirement mentioned in section 297(4) is] satisfied in relation to the company receiving them;

(b) the letting of ships, other than oil rigs or pleasure craft, on charter in circumstances where the requirements mentioned in paragraphs (a) to (d) of section 297(6) are satisfied in relation to the company so letting them.

(3D) Activities of a company or of any of its subsidiaries shall be disregarded for the purposes of subsections (3A) to (3C) above to the extent that they consist in—

(a) the holding of shares in or securities of, or the making of loans to, one or more of the company’s subsidiaries; or

(b) the holding and managing of property used by the company or any of its subsidiaries for the purposes of—

(i) research and development from which it is intended that a qualifying trade to be carried on by the company or any of its subsidiaries will be derived; or

(ii) one or more qualifying trades so carried on.

(3E) Activities of a subsidiary of a company shall also be disregarded for the purposes of subsections (3A) to (3C) above to the extent that they consist in—

(a) the making of loans to the company; or

(b) in the case of a mainly trading subsidiary, activities carried on otherwise than in pursuance of its main purpose.

(3F) For the purposes of subsection (3E) above—

(a) “mainly trading subsidiary” means a subsidiary which, apart from purposes capable of having no significant effect (other than in relation to incidental matters) on the extent of its activities, exists wholly for the purpose of carrying on one or more qualifying trades; and

(b) that purpose shall be taken to be its main purpose.]

F6 (4) F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) M1 Without prejudice to the generality of subsection (2) above, but subject to subsection (6) below, a company ceases to comply with that subsection if before the end of the relevant period a resolution is passed, or an order is made, for the winding up of the company (or, in the case of a winding up otherwise than under the M2 Insolvency Act 1986 or the M3 Companies (Northern Ireland) Order 1986, any other act is done for the like purpose) or the company is dissolved without winding up.

(6) A company shall not be regarded as ceasing to comply with subsection (2) above if it does so by reason of being wound up or dissolved without winding up and—

(a) F8 . . . the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax; and

(b) the company’s net assets, if any, are distributed to its members or dealt with as bona vacantia before the end of the relevant period or, in the case of a winding up, the end (if later) of three years from the commencement of the winding up.

[F9 (6A) The value of the relevant assets—

(a) must not exceed £15 million immediately before the issue of the eligible shares; and

(b) must not exceed £16 million immediately afterwards.

(6B) Subject to subsection (6C) below, the reference in subsection (6A) above to the value of the relevant assets is a reference—

(a) in relation to a time when the company did not have any qualifying subsidiaries, to the value of the gross assets of the company at that time; and

(b) in relation to any other time, to the aggregate value at that time of the gross assets of all the companies in the company’s group.

(6C) For the purposes of subsection (6B) above assets of any member of the company’s group that consist in rights against, or in shares in or securities of, another member of the group shall be disregarded.

(6D) In subsections (6B) and (6C) above references, in relation to any time, to the company’s group are references to the company and its qualifying subsidiaries at that time.]

(7) F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F11 F12 (8) [F13 Subject to sections 304A and 308], the company must not—

(a) at any time in the relevant period control (or together with any person connected with it control) another company or be under the control of another company (or another company and any other person connected with that other company), or

(b) at any such time be a 51 per cent. subsidiary of another company or itself have a 51 per cent. subsidiary,

and no arrangements must be in existence at any time in that period by virtue of which the company could fall within paragraph (a) or (b) above.

(8A) Section 312(1A)(b) applies to determine the relevant period for the purposes of this section and sections 294, 295 and 296.]

[F14 (8B) In arriving at the relevant period for the purposes of sections 294 to 296 any time falling on or after 29th November 1994 shall be ignored; and subsection (8A) above shall have effect subject to the preceding provisions of this subsection.]

F15 (9) F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F15 (10) F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F15 (11) F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 S. 293(1)-(3) substituted (with effect as mentioned in s. 137(1)(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 15 para. 4(7)(a)

F2 S. 293(2)(aa) substituted for s. 293(2)(b) (with effect as mentioned in Sch. 8 para. 1 of the amending Act) by Finance Act 1997 (c. 16), Sch. 8 para. 4(1)

F3 S. 293(3A)-(3F) inserted (with effect as mentioned in Sch. 8 para. 1 of the amending Act) by Finance Act 1997 (c. 16), Sch. 8 para. 4(2)

F4 Words in s. 293(3)(b) inserted (with effect as mentioned in s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 9(1)

F5 Words in s. 293(3C) subsituted for specified purposes (retrospectively) by Finance Act 2001 (c. 9), Sch. 15 para. 14

F6 S.293(4)omitted by 1988(F) Sch.4 para.6(2)where s.50 (changes applicable in respect of shares issued on or after 29July 1988and before the end of 1993in respect of private rented housing)applies.

F7 S. 293(4)(9)-(11) repealed (with effect as mentioned in s. 137(1)(2), Sch. 26 Pt. 5(17) Note of the repealing Act) by Finance Act 1994 (c. 9), Sch. 15 para. 7(b)(e), Sch. 26 Pt. 5(17)

F8 Words in s. 293(6)(a) repealed (with effect as mentioned in Sch. 13 para. 9(6), Sch. 27 Pt. 3(14) Note 1 of the repealing Act) by Finance Act 1998 (c. 36), Sch. 13 para. 9(2), Sch. 27 Pt. 3(14)

F9 S. 293(6A)-(6D) inserted (with effect as mentioned in s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 9(3)

F10 S. 293(7) repealed (with effect as mentioned in s. 74(3), Sch. 27 Pt. 3(14) Note 4 of the repealing Act) by Finance Act 1998 (c. 36), Sch. 13 para. 9(4), Sch. 27 Pt. 3(14)

F11 S. 293(8)(8A) substituted for s. 293(8) (with effect as mentioned in s. 137(1)(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 15 para. 4(7)(d)

F12 S. 293(8) (as it has effect in relation to shares issued before 1st January 1994) amended (with effect as mentioned in Sch. 13 para. 38(2) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 paras. 37, 38(1)

F13 Words in s. 293(8) substituted (with effect as mentioned in s. 74(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 13 para. 9(5)

F14 S. 292(8B) inserted (1.5.1995) by Finance Act 1995 (c. 4), s. 66(3)

F15 Subss.(9)-(11)omitted by 1988(F) Sch.4 para.6(2)where s.50 (changes applicable in respect of shares issued on or after 29July 1988and before the end of 1993in respect of private rented housing)applies.

Modifications etc. (not altering text)

C1 S. 293 applied (with effect in accordance with Sch. 13 para. 4(4) of the 1995 amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), Sch. 5B para. 3(2)(c) (as inserted by Finance Act 1995 (c. 4), Sch. 13 para. 4(3))

C2 See Insolvency (Northern Ireland) Order 1989 art.381(2)and Sch.9 para.59 (S.I.1989 No.2405—not reproduced)for change from a day to be appointed.

C3 S. 293(8) excluded (with effect as mentioned in s. 74(3) of the 1998 amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), Sch. 5B para. 8(7) (as inserted by Finance Act 1998 (c. 36), Sch. 13 para. 34)

Marginal Citations

M1 Source-1983 Sch.5(4)-(7)

M2 1986 c. 45.

M3 S.I. 1986/1032 (N.I. 6).