Finance Act 2000

Meaning of “qualifying subsidiary”

15 (1) A company (“the subsidiary”) is a qualifying subsidiary of another company (“the company”) if the following conditions are met.

(2) The conditions are—

(a) that the company or another of its subsidiaries possesses not less than 75% of the issued share capital of, and not less than 75% of the voting power in, the subsidiary;

(b) that the company or another of its subsidiaries would—

(i) in the event of a winding up of the subsidiary, or

(ii) in any other circumstances,

be beneficially entitled to receive not less than 75% of the assets of the subsidiary which would then be available for distribution to the shareholders of the subsidiary;

(c) that the company or another of its subsidiaries is beneficially entitled to not less than 75% of any profits of the subsidiary which are available for distribution to the shareholders of the subsidiary;

(d) that no person other than the company or another of its subsidiaries has control of the subsidiary within the meaning of section 840 of the Taxes Act 1988; and

(e) that no arrangements are in existence by virtue of which the conditions in paragraphs (a) to (d) would cease to be met.

(3) The subsidiary shall not be regarded, at a time when it or another company is being wound up, as having ceased on that account to be a company in relation to which the conditions in sub-paragraph (2) are met if—

(a) the conditions in that sub-paragraph would be met apart from the winding up, and

(b) the winding up is for commercial reasons and is not part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

(4) The subsidiary shall not be regarded, at any time when arrangements are in existence for the disposal by the company or (as the case may be) by another subsidiary of the company of all its interest in the subsidiary in question, as having ceased on that account to be a qualifying subsidiary if the disposal is to be for commercial reasons and not part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.