INTM561290 - Hybrids: allocation of DII within a group: condition E

There is a time during the overlapping period where Company A and Company B are both within the same group of companies

  • If for part of the overlapping period Company A is not in the same group of companies as Company B, that part is excluded from the overlapping period, but remains part of the surplus period
  • If for part of the overlapping period Company B is not in the same group of companies as Company A, that part is excluded from the overlapping period, but remains part of the shortfall period

For example, Company A has an accounting period of 1 January 2023 to 31 December 2023 in which it has a DII surplus (its surplus period).

Company B has an accounting period of 1 April 2022 to 31 March 2023 in which it has a DII shortfall (its shortfall period).

The overlapping period is 1 January 2023 to 31 March 2023.

Company C owns 75% of the ordinary share capital of Company B and acquires 75% of the ordinary share capital in Company A on 1 February 2023. Company A and Company B become members of the same group of companies from that date.

Company A’s surplus period is 1 January to 31 December 2023. As it did not become a member of the same group as Company B until 1 February, January would not form part of the overlapping period, which is 1 February 2023 to 31 March 2023.

If Company C reduced its share in Company B to below 75% of ordinary share capital on 1 March 2023, Company A and Company would cease to be members of the same group of companies.

March 2023 would remain part of Company B’s shortfall period (1 April 2022 to 31 March 2023), but be excluded from the overlapping period, which now becomes 1 February 2023 to 28 February 2023.

In each case, Condition E is still met.

75% subsidiary

This takes the same meaning as in section 151 CTA 2010, that at least 75% of ordinary share capital of the subsidiary is beneficially held by the shareholder.

For example, if Company A owns 75% of the ordinary share capital of Company B, or vice versa, they are members of the same group of companies.

Section 151 CTA 2010 places further conditions on this definition.