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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

HM Revenue & Customs
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Enterprise Management Incentives (EMI): Qualifying companies: Qualifying subsidiaries

A company that has one or more subsidiaries does not qualify for EMI unless each subsidiary is a qualifying subsidiary. A subsidiary means a company which the company controls, either on its own or together with any person connected with it. Subsidiary companies include dormant companies.

A subsidiary is only a qualifying subsidiary if the company whose shares are subject to EMI options holds, directly or indirectly, more than 50% of the share capital of the subsidiary.

No other person must be able to control the subsidiary, with control having the same meaning as it had for the independence requirement. There must be no arrangements in existence by virtue of which any person could obtain control of it.

If a subsidiary is being wound up, disposed of or is in administration or receivership, the company will not be treated as failing the qualifying subsidiaries test as a result of something that is done as a consequence of the winding up, disposal or going into administration or receivership. This only applies if the transaction is done for commercial purposes and is not part of a scheme or arrangement the purpose (or one of the main purposes) of which is to avoid tax, (Paragraph 11(4) - (9)).

See ETASSUM52050 if a company has subsidiaries that manage property.