BLM80545 - sale of lessor companies and similar arrangements: calculating the income amount: adjustments to the basic amount: company becomes a consortium company - example 1 of 2

Section 405 CTA2010

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In this example A Ltd is a 75% subsidiary of B Ltd. At stage 2 A Ltd is a consortium company and B Ltd is a member of the consortium. B Ltd has not relinquished the whole of its interest in A Ltd and this must be reflected in an adjustment to the basic amount.

The amount of the income is restricted to the appropriate percentage of the basic amount.

The appropriate percentage is found by subtracting the ‘ownership percentage’ at the end of the day from 100%.

The ownership percentage is the lesser of:

• The percentage of the ordinary share capital of company A that is beneficially owned by company B;
• The percentage to which company B is beneficially entitled of any profits available for distribution to equity holders of Company A;
• The percentage to which company B would be beneficially entitled of any assets of Company A available for distribution to its equity holders on a winding up.

In this case let us assume the ownership percentage is 60% and the appropriate percentage is therefore 40%.