PART I THE CHARGE TO TAX

Small companies’ rate

F113ZA Interpretation of section 13(7)

1

In determining for the purposes of section 13(7) whether one body corporate is a 51 per cent subsidiary of another, that other shall be treated as not being the owner of any share capital—

a

which it owns indirectly, and

b

which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.

2

Notwithstanding that at any time a company (“the subsidiary company”) is a 51 per cent subsidiary of another company (“the parent company”) it shall not be treated at that time as such a subsidiary for the purposes of section 13(7) unless, additionally, at that time—

a

the parent company would be beneficially entitled to more than 50 per cent of any profits available for distribution to equity holders of the subsidiary company, and

b

the parent company would be beneficially entitled to more than 50 per cent of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.

3

For the purposes of section 13(7) and this section—

a

“trading or holding company” means a trading company or a company the business of which consists wholly or mainly in the holding of shares or securities of trading companies that are its 90 per cent subsidiaries;

b

“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades;

c

a company is owned by a consortium if 75 per cent or more of the ordinary share capital of the company is beneficially owned between them by companies of which none—

i

beneficially owns less than 5 per cent of that capital,

ii

would be beneficially entitled to less than 5 per cent of any profits available for distribution to equity holders of the company, or

iii

would be beneficially entitled to less than 5 per cent of any assets of the company available for distribution to its equity holders on a winding up,

and those companies are called the members of the consortium.

4

Schedule 18 (equity holders and assets etc. available for distribution) applies for the purposes of subsections (2) and (3)(c) above as it applies for the purposes of section 413(7).