Income and Corporation Taxes Act 1988

838 Subsidiaries. U.K.

M1 (1) For the purposes of the [F1 Corporation Tax Acts] a body corporate shall be deemed to be—

(a) a “51 per cent. subsidiary” of another body corporate if and so long as more than 50 per cent. of its ordinary share capital is owned directly or indirectly by that other body corporate;

(b) a “75 per cent. subsidiary” of another body corporate if and so long as not less than 75 per cent. of its ordinary share capital is owned directly or indirectly by that other body corporate;

(c) a “90 per cent. subsidiary” of another body corporate if and so long as not less than 90 per cent. of its ordinary share capital is owned directly by that other body corporate.

(2) In subsection (1)(a) and (b) above “owned directly or indirectly” by a body corporate means owned, whether directly or through another body corporate or other bodies corporate or partly directly and partly through another body corporate or other bodies corporate.

(3) In this section references to ownership shall be construed as references to beneficial ownership.

(4) For the purposes of this section the amount of ordinary share capital of one body corporate owned by a second body corporate through another body corporate or other bodies corporate, or partly directly and partly through another body corporate or other bodies corporate, shall be determined in accordance with the following provisions of this section.

(5) Where, in the case of a number of bodies corporate, the first directly owns ordinary share capital of the second and the second directly owns ordinary share capital of the third, then for the purposes of this section, the first shall be deemed to own ordinary share capital of the third through the second, and, if the third directly owns ordinary share capital of a fourth, the first shall be deemed to own ordinary share capital of the fourth through the second and third, and the second shall be deemed to own ordinary share capital of the fourth through the third and so on.

(6) In this section—

(a) any number of bodies corporate of which the first directly owns ordinary share capital of the next and the next directly owns ordinary share capital of the next but one, and so on, and, if they are more than three, any three or more of them, are referred to as “a series”;

(b) in any series—

(i) that body corporate which owns ordinary share capital of another through the remainder is referred to as the “first owner”;

(ii) that other body corporate the ordinary share capital of which is so owned is referred to as “the last owned body corporate”;

(iii) the remainder, if one only, is referred to as “an intermediary” and, if more than one, are referred to as “a chain of intermediaries”;

(c) a body corporate in a series which directly owns ordinary share capital of another body corporate in the series is referred to as “an owner”; and

(d) any two bodies corporate in a series of which one owns ordinary share capital of the other directly, and not through one or more of the other bodies corporate in the series, are referred to as being directly related to one another.

(7) Where every owner in a series owns the whole of the ordinary share capital of the body corporate to which it is directly related, the first owner shall be deemed to own through the intermediary or chain of intermediaries the whole of the ordinary share capital of the last owned body corporate.

(8) Where one of the owners in a series owns a fraction of the ordinary share capital of the body corporate to which it is directly related, and every other owner in the series owns the whole of the ordinary share capital of the body corporate to which it is directly related, the first owner shall be deemed to own that fraction of the ordinary share capital of the last owned body corporate through the intermediary or chain of intermediaries.

(9) Where—

(a) each of two or more of the owners in a series owns a fraction, and every other owner in the series owns the whole, of the ordinary share capital of the body corporate to which it is directly related; or

(b) every owner in a series owns a fraction of the ordinary share capital of the body corporate to which it is directly related;

the first owner shall be deemed to own through the intermediary or chain of intermediaries such fraction of the ordinary share capital of the last owned body corporate as results from the multiplication of those fractions.

(10) Where the first owner in any series owns a fraction of the ordinary share capital of the last owned body corporate in that series through the intermediary or chain of intermediaries in that series, and also owns another fraction or other fractions of the ordinary share capital of the last owned body corporate, either—

(a) directly, or

(b) through an intermediary or intermediaries which is not a member or are not members of that series, or

(c) through a chain or chains of intermediaries of which one or some or all are not members of that series, or

(d) in a case where the series consists of more than three bodies corporate, through an intermediary or intermediaries which is a member or are members of the series, or through a chain or chains of intermediaries consisting of some but not all of the bodies corporate of which the chain of intermediaries in the series consists;

then, for the purpose of ascertaining the amount of the ordinary share capital of the last owned body corporate owned by the first owner, all those fractions shall be aggregated and the first owner shall be deemed to own the sum of those fractions.

Textual Amendments

F1 Words in s. 838(1) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 222 (with Sch. 2)

Modifications etc. (not altering text)

C1 S. 838 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 184(1)(a), 289 (with ss. 60(1), 101(1), 171, 201(3))

S. 838 applied (27.7.1993) by 1993 c. 34, s. 189(6)

C2 S. 838 modified (24.7.2002) by Finance Act 2002 (c. 23), Sch. 29 para. 50(7)

C3 S. 838 applied (1.1.2008 with effect in accordance with reg. 1(2) of the affecting S.I.) by The Scientific Research Organisations Regulations 2007 (S.I. 2007/3426), regs. 1(1), 2(3)

C4 S. 838 applied (with effect in accordance with s. 93(2) of the affecting Act) by Finance Act 2009 (c. 10), Sch. 46 para. 18(3)(4)

C5 Definition in s. 838 modified (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 170(2)(c), 289 (with ss. 60(1), 101(1), 171, 201(3))

C6 S. 838(2)-(10) applied (30.3.1995) by The Electricity (Class Exemptions from the Requirement for a Licence) (No. 2) Order 1995 (S.I. 1995/909), art. 2(2)(c)

S. 838(2)-(10) applied (1.10.2001) by The Electricity (Class Exemptions from the Requirement for a Licence) Order 2001 (S.I. 2001/3270), art. 2(2)(c)

S. 838(2)-(10) applied (with effect in accordance with Sch. 29 Pt. 14 of the affecting Act) by Finance Act 2002 (c. 23), Sch. 29 para. 50(7)

C7 S. 838(2)-(10) applied (1.4.2009 with effect in accordance with s. 1329(1) of the affecting Act) by Corporation Tax Act 2009 (c. 4), s. 768(9) (with Sch. 2 Pts. 1, 2)

C8 S. 838(4)-(10) applied (27.7.1993) by 1993 c. 37, s. 12, Sch. 2, Pt. I para. 31(11)

Marginal Citations

M1 Source—1970 s.532.