Income Tax Act 2007

Meaning of “qualifying subsidiary”

51 (1) In relation to shares issued before 17 March 2004, section 191 (as applied by sections 137(7), 139(4), 140(2) and 142(4)) applies with the following modifications—

(a) in subsection (1), the insertion at the end of “and, except as provided by subsection (3), continue to be met until the time that is relevant for the purposes of section 134(2)”,

(b) in subsection (2), the substitution for paragraph (a) of—

“(a) the relevant company, or another of its subsidiaries, possesses at least 75% of the issued share capital of, and at least 75% of the voting power in, the subsidiary,

(aa) the relevant company, or another of its subsidiaries, would in the event of a winding up of the subsidiary, or in any other circumstances, be beneficially entitled to receive at least 75% of the assets of the subsidiary which would then be available for distribution to the equity holders of the subsidiary,

(ab) the relevant company, or another of its subsidiaries, is beneficially entitled to at least 75% of any profits of the subsidiary which are available for distribution to the equity holders of the subsidiary,”,

(c) in paragraph (c) of subsection (2), the substitution for “either of the conditions in paragraphs (a) and (b)” of “any of the conditions in paragraphs (a), (aa), (ab) and (b)”,

(d) in subsection (3), the substitution for “any other company” of “the relevant company” and the substitution for the words from “the winding up or dissolution” to the end of that subsection of—

“(a) the winding up or dissolution is for genuine 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,

(b) the net assets, if any, of the subsidiary or, as the case may be, the relevant company are distributed to its members, or dealt with as bona vacantia, before the time that is relevant for the purposes of section 134(2) or, in the case of a winding up, the end (if later) of 3 years from the commencement of the winding up.”,

(e) the omission of subsection (4),

(f) in subsection (5), the substitution for “arrangements are in existence for” of “of” and the insertion after “another subsidiary” of “within the continuous period that is relevant for the purposes of section 134(3)”,

(g) in subsection (5)(a), the omission of “to be”,

(h) in subsection (5)(b), the substitution for “is not to be” of “not”, and

(i) after subsection (5), the insertion of—

“(6) The persons who are equity holders of a subsidiary, and the percentage of the assets of a subsidiary to which an equity holder would be entitled, is to be determined in accordance with paragraphs 1 and 3 of Schedule 18 to ICTA, taking—

(a) references in paragraph 3 to the first company as references to an equity holder, and

(b) references to a winding up as including references to any other circumstances in which assets of the subsidiary are available for distribution to its equity holders.”

(2) Sub-paragraph (1) applies in relation to section 191 as applied by sections 576B(7), 576D(4), 576E(2) and 576G(4) of ICTA (which make corresponding provision for the purposes of corporation tax) as it applies in relation to section 191 as applied by sections 137(7), 139(4), 140(2) and 142(4).

(3) For the purposes of sub-paragraph (2), sub-paragraph (1) applies with—

(a) in paragraphs (a) and (d), the substitution for “section 134(2)” of “section 576A(2) of ICTA”, and

(b) in paragraph (f), the substitution for “section 134(3)” of “section 576A(3) of ICTA”.