Statement of Practice 5 (1994)
Published 20 July 1994
© Crown copyright 1994
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Under section 13(4) Income and Corporation Taxes Act (ICTA) 1988, a company which does not carry on any trade or business in an accounting period is disregarded in calculating the profits limits for the small companies’ relief of any other company with which it is associated.
A holding company which does not carry on a trade, but which holds the shares in one or more companies which are its 51% subsidiaries, may or may not be carrying on a business in respect of that holding. HM Revenue and Custom’s view is that a company is not carrying on such a business in an accounting period if, throughout that period, all of the following apply:
- it has no assets other than shares in companies which are its 51% subsidiaries
- it is not entitled to a deduction, as charges or management expenses, in respect of any outgoings
- it has no income or gains other than dividends which it has distributed in full to its shareholders and which are, or could be, franked investment income received by that company (section 832(1) and (4A))
- the 51% subsidiaries are 51% subsidiaries under sections 247(8), (8A) and (9A) (see now ICTA 1988 section 13ZA(1) to (4))
Note: this text of this statement is as it appears in IR 131 (August 2002).