MTT17030 - Scope: Determining ownership of entities: Ownership interests and controlling interests
An ownership interest can mean a direct or indirect ownership interest, for the purposes of MTT.
That ownership interest is also a controlling interest where the owner is, or would be, required to consolidate the entity.
A main entity does not have an ownership interest in its permanent establishment(s), but it does have a controlling interest.
This is set out in Section 242 of Finance (No.2) Act 2023.
Direct ownership interest
An entity or individual (“A”) has a direct ownership interest in an entity (“B”) if:
- a has an interest in B, which can be shares, other securities or any other interest,
- that interest entitles A to a share of the profits, capital or reserves of B or a permanent establishment of B, and
- the interest would, ignoring any requirement to consolidate the assets, liabilities, income, expenses and cash flows of B in the consolidated financial statements of A, be accounted for as equity in those statements.
A’s entitlement to profits, capital or reserves may arise as a result of any event, including distributions and winding-up.
This definition effectively limits direct ownership interests to interests which are recognised by the holder as equity for accounting purposes.
Indirect ownership interest
An entity or individual (“A”) has an indirect ownership interest in an entity (“B”) if:
- A has a direct ownership interest in an entity that has a direct ownership interest in B, or
- A has a direct ownership interest in an entity that has an indirect ownership interest in B.
Main entity does not have ownership interest in permanent establishment
For MTT purposes, a permanent establishment is treated as a separate entity to the main entity.
However, a main entity is not considered to have ownership interests in its permanent establishments.
This does not prevent the responsible member rules applying in relation to permanent establishments in the circumstances described at MTT61030. For guidance on attributing top-up amounts to repsonsible members in permanent establishment cases, ses MTT61050.
This provision was amended by Finance Act 2026. This guidance reflects the current version of the legislation. Consult Finance Act 2026 for legislation applicable to prior periods if the retrospection election does not apply.
Tax-transparent entities
A tax-transparent entity, such as a general partnership formed under UK law, is an entity for the purposes of MTT. Therefore, a partner in a partnership has an indirect rather than a direct ownership interest in an entity which is wholly or partly owned by the partnership. The partnership itself is regarded as the holder of the direct ownership interests in those entities. Only the holder of the direct ownership interest is relevant, meaning that HMRC will not look through a tax-transparent entity. Using the same general partneship example, HMRC will not look through the partnership to the partners.
Controlling interest
An ownership interest that A has in B is a 'controlling interest' if:
- as a result of that ownership interest, A is required to consolidate the assets, liabilities, income, expenses and cash flows of B on a line by line basis (see MTT09530) in accordance with an acceptable accounting standard, or
- a does not prepare consolidated financial statements, but would be required to consolidate the assets, liabilities, income, expenses and cash flows of B if it did. This is sometimes referred to as the “deemed consolidation” rule.
Controlling interest - exception to deemed consolidation rule
A will not have a controlling interest in B through the deemed consolidation rule if B is not required to be consolidated with A according to any applicable authorised accounting standard.
For example, an authorised accounting standard may not require, or may specifically not permit, the consolidation of investment entities.
Controlling interest – permanent establishments
A main entity will always have a controlling interest in its permanent establishment(s), despite the fact that it is not considered to have an ownership interest in the permanent establishment.