Income Tax (Earnings and Pensions) Act 2003

Meaning of “qualifying subsidiary”

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

(2) The conditions are—

(a) that the holding company 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 holding company 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 holding company 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 holding company has control of the subsidiary; 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) In sub-paragraph (2) any reference to the holding company is to be read as a reference to—

(a) the holding company by itself,

(b) the holding company and one or more other subsidiaries of the holding company, or

(c) one or more other subsidiaries of the holding company.

(4) Sub-paragraph (5) applies at a time when the subsidiary or another company is being wound up.

(5) The subsidiary is not to be regarded as having ceased, on account of the winding up, 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 (or one of the main purposes) of which is the avoidance of tax.

(6) Sub-paragraph (7) applies at a time when arrangements are in existence for the disposal by—

(a) the holding company, or

(b) another subsidiary of the holding company,

of all of its interest in the subsidiary.

(7) The subsidiary is not to be regarded as having ceased, on account of those arrangements, to be a company in relation to which the conditions in sub-paragraph (2) are met if the disposal is to be for commercial reasons and is not to be part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.