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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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Groups: surrender of ACT: definition of subsidiary

ICTA88/S240 (10) to (13)

For the purposes of ICTA88/S240 a company resident in the UK is a subsidiary of another company if it is a body corporate which satisfies all the conditions at (a), (b), (c) and(d) below.

a. It qualifies as a 51% subsidiary as defined in ICTA88/S838 except that the other company is treated as not being the owner:
 

  • of any share capital which it owns directly in a body corporate, if a profit on the sale of the shares would be treated as a trading receipt of its trade,

or
 

  • of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt,

or
 

  • of any share capital which it owns directly or indirectly in a body corporate not resident in the UK.

There is guidance at CTM36125 on the beneficial ownership ofshares where the company holding the shares is being wound up.

b. No arrangements are in existence by virtue of which any person has, or could obtain, control of the subsidiary company but not of the parent company.

c. The parent company is beneficially entitled to more than 50% of any profits available for distribution to equity holders of the subsidiary company.

d. The parent company would be beneficially entitled to more than 50% of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.