Corporation Tax Act 2009

Chapter 8 U.K. Groups of companies: introduction

Introductory U.K.

764 Meaning of “company”, “group” and “subsidiary” U.K.

(1) This Chapter applies for the purposes of this Part to determine whether companies form a group and, where they do, which is the principal company of the group.

(2) In this Chapter, references to a company apply only to—

(a) a company within the meaning of the Companies Act 2006 (c. 46),

(b) a company (other than a limited liability partnership) constituted under any other Act or by a Royal Charter or letters patent,

(c) a company formed under the law of a country or territory outside the United Kingdom,

(d) a [F1 registered society],

(e) an incorporated friendly society within the meaning of the Friendly Societies Act 1992 (c. 40), or

(f) a building society.

(3) In this Part “group” and “subsidiary” must be read with any necessary modifications if applied to a company formed under the law of a country or territory outside the United Kingdom.

Textual Amendments

F1 Words in Act substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 141 (with Sch. 5)

Rules U.K.

765 General rule: a company and its 75% subsidiaries form a group U.K.

(1) The general rule is that—

(a) a company (“A”) and all its 75% subsidiaries form a group, and

(b) if any of those subsidiaries have 75% subsidiaries, the group includes them and their 75% subsidiaries, and so on.

(2) A is referred to in this Chapter and in Chapter 9 as the principal company of the group.

(3) Subsections (1) and (2) are subject to the following provisions of this Chapter.

766 Only effective 51% subsidiaries of principal company to be members of group U.K.

(1) A group of companies does not include any company (other than the principal company of the group) that is not an effective 51% subsidiary of the principal company of the group.

(2) For the meaning of “effective 51% subsidiary”, see section 771.

767 Principal company cannot be 75% subsidiary of another company U.K.

(1) The general rule is that a company (“A”) is not the principal company of a group if it is itself a 75% subsidiary of another company (“B”).

(2) That rule is subject to subsection (3).

(3) A is the principal company of a group (“group C”) if—

(a) A and B are prevented from being members of another group by section 766,

(b) the requirements of sections 765 and 766 are met in relation to group C, and

(c) A being the principal company of group C does not enable a further company to be the principal company of a group of which A would be a member.

768 Company cannot be member of more than one group U.K.

(1) A company cannot be a member of more than one group.

(2) If, apart from subsection (1), a company (“A”) would be a member of 2 or more groups, the group of which it is a member is determined by applying the rules in subsections (4), (6), (7) and (8) successively in that order until an answer is obtained.

(3) In those subsections the principal company of each group is referred to as its head.

(4) A is a member of the group of which it would be a member if in applying section 766 (only effective 51% subsidiaries of principal company to be members of group) the amounts specified in subsection (5) were ignored.

(5) Those amounts are—

(a) any amount to which a head of a group is beneficially entitled of any profits available for distribution to equity holders of a head of another group (see section 772), and

(b) any amount to which a head of a group would be beneficially entitled of any assets of a head of another group available for distribution to its equity holders on a winding up (see that section).

(6) A is a member of the group the head of which is beneficially entitled to a percentage of the profits available for distribution to A's equity holders that is greater than the percentage of those profits to which any other head of a group is so entitled.

(7) A is a member of the group the head of which would be beneficially entitled to a percentage of any of A's assets available for distribution to its equity holders on a winding up that is greater than the percentage of those assets to which any other head of a group would be so entitled.

(8) A is a member of the group the head of which owns directly or indirectly a percentage of A's ordinary share capital that is greater than the percentage of that capital owned directly or indirectly by any other head of a group.

[F2 (9) For the purposes of subsection (8) share capital is owned directly or indirectly if it would be so owned by a body corporate for the purposes of section 1154(2) of CTA 2010 (meaning of “51% subsidiary”).]

Textual Amendments

F2 S. 768(9) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 645 (with Sch. 2)

769 Continuity of identity of group U.K.

(1) A group of companies remains the same group of companies for the purposes of this Part so long as the same company is the principal company of the group.

(2) If the principal company of a group becomes a member of another group—

(a) the groups are treated as the same group for the purposes of this Part, and

(b) the question whether a company has ceased to be a member of a group must be determined accordingly.

(3) The passing of a resolution or the making of an order, or any other act, for the winding up of a company is not treated for the purposes of this Part as causing any company to cease to be a member of any group of which it is a member.

770 Continuity where group includes an SE U.K.

(1) This section applies if the principal company of a group (“Group 1”)—

(a) becomes an SE as a result of being the acquiring company in the formation of an SE by merger by acquisition (in accordance with Articles 2(1), 17(2)(a) and 29(1) of Council Regulation (EC) No 2157/2001 on the Statute for a European company),

(b) becomes a subsidiary of a holding SE (formed in accordance with Article 2(2) of that Regulation), or

(c) is transformed into an SE (in accordance with Article 2(4) of that Regulation).

(2) For the purposes of this Part—

(a) Group 1 and any group of which the SE is a member on formation is treated as the same, and

(b) the question whether a company has ceased to be a member of a group must be determined accordingly.

771 Meaning of “effective 51% subsidiary” U.K.

(1) For the purposes of this Part a company (“the subsidiary”) is an effective 51% subsidiary of another company (“the parent”) if (and only if) conditions A and B are met.

(2) Condition A is that the parent is beneficially entitled to more than 50% of any profits available for distribution to equity holders of the subsidiary (see section 772).

(3) Condition B is that the parent would be beneficially entitled to more than 50% of any assets of the subsidiary available for distribution to its equity holders on a winding up (see section 772).

[F3 772 Equity holders and profits or assets available for distribution U.K.

(1) Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders and profits or assets available for distribution) applies for the purposes of sections 768 and 771.

[F4 (2) In that Chapter as it applies for those purposes—

(a) section 158 of CTA 2010 has effect as if after subsection (2) there were inserted—

“(2A) But for those purposes a person carrying on a business of banking is not treated as a loan creditor of a company in respect of any loan capital or debt issued or incurred by the company for money lent by the person to the company in the ordinary course of that business.”, and

(b) sections 171(1)(b) and (3), 173, 174 and 176 to 182 of that Act are to be treated as omitted.]]

Textual Amendments

F3 S. 772(1)(2) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 646 (with Sch. 2)

F4 S. 772(2) substituted (retrospective and with effect in accordance with art. 1(2) of the amending S.I.) by Corporation Tax Act 2010 (Amendment) Order 2010 (S.I. 2010/2902), arts. 1(1), 3

773 Supplementary provisions U.K.

(1) In applying the definition of “75% subsidiary” in [F5 section 1154 of CTA 2010] for the purposes of this Chapter, any share capital of a [F1 registered society] is treated as ordinary share capital.

(2) Section 170(12) to (14) of TCGA 1992 (application to certain statutory bodies of provisions relating to groups of companies) applies for the purposes of this Chapter as it applies for the purposes of sections 171 to 181 of TCGA 1992.

Textual Amendments

F1 Words in Act substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 141 (with Sch. 5)

F5 Words in s. 773(1) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 647 (with Sch. 2)