Income and Corporation Taxes Act 1988

293 Qualifying companies

(1) Subject to section 294, a company is a qualifying company if it is incorporated in the United Kingdom and complies with the requirements of this section.

(2) The company must, throughout the relevant period, be an unquoted company which is resident in the United Kingdom and not resident elsewhere, and be—

(a) a company which exists wholly, or substantially wholly, for the purpose of carrying on wholly or mainly in the United Kingdom one or more qualifying trades; or

(b) a company whose business consists wholly of—

(i) the holding of shares or securities of, or the making of loans to, one or more qualifying subsidiaries of the company; or

(ii) both the holding of such shares or securities, or the making of such loans, and the carrying on wholly or mainly in the United Kingdom of one or more qualifying trades.

(3) In this section “qualifying subsidiary”, in relation to a company, means a subsidiary of that company of a kind which may be held by virtue of sections 308 and 309.

(4) Where a company has one or more qualifying subsidiaries, it shall not be a qualifying company in relation to shares issued after 18th March 1986 if the qualifying trade or trades carried on by the company and its subsidiaries, taken as a whole, are not carried out wholly or mainly in the United Kingdom.

(5) 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 [1986 c. 45.] Insolvency Act 1986 or the [S.I. 1986/1032 (N.I. 6).] 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) it is shown that 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.

(7) The company’s share capital must not, at any time in the relevant period, include any issued shares that are not fully paid up.

(8) Subject to sections 308 and 309, the company must not at any time in the relevant period—

(a) 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) 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.

(9) A company is not a qualifying company in relation to shares issued before 19th March 1986 if—

(a) an individual has acquired a controlling interest in the company’s trade after 5th April 1983; and

(b) at any time in the period mentioned in subsection (10) below he has, or has had, a controlling interest in another trade; and

(c) the trade carried on by the company or a substantial part of it—

(i) is concerned with the same or similar types of property or parts thereof or provides the same or similar services or facilities as the other trade, or

(ii) serves substantially the same or similar outlets or markets as the other trade.

Section 298(1) and (2) shall apply for the purposes of this subsection.

(10) The period referred to in subsection (9) above is the period beginning two years before and ending three years after—

(a) the date on which the shares were issued; or

(b) if later, the date on which the company began to carry on the trade.

(11) In subsections (9) and (10) above references to a company’s trade include references to the trade of any of its subsidiaries.