ETASSUM52050 - Enterprise Management Incentives (EMI): Qualifying companies: Qualifying property managing subsidiaries

Paragraphs 11A & 11B, Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

A company will not qualify if it has a property managing subsidiary which is not a 90% subsidiary of the company. A property managing company is one whose business consists wholly or mainly in the holding or managing of land, buildings or interests in land.

To be a qualifying property managing subsidiary, the company whose shares are subject to EMI options must:

  • possess directly at least 90% of the issued share capital and the voting power in the subsidiary, or
  • be entitled to receive at least 90% of the assets of the subsidiary, in the event of a winding up or in any other circumstances, if they were all distributed,
  • be entitled to at least 90% of profits of the subsidiary available for distribution to shareholders.

No other person must be able to control the subsidiary, with control having the same meaning as it has 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.