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HMRC internal manual

Venture Capital Schemes Manual

EIS: income tax relief: the issuing company: qualifying subsidiaries requirement


Any subsidiary that the issuing company has at any time in Period B (VCM10540) must be a qualifying subsidiary of the company.

Meaning of ‘qualifying subsidiary’ - ITA07/S191

A company is a qualifying subsidiary if it is a 51% subsidiary of the investee company. The meaning of 51% subsidiary is the same as that given in CTA10/S1154. That is, the investee company must directly or indirectly hold more than 50% of the ordinary share capital.

In addition in order to be a qualifying subsidiary, no other person other than the company issuing the shares, or one of its subsidiaries, must control the subsidiary, and there must be no arrangements by virtue of which that requirement could cease to be met.

‘Control’ for this purpose has the meaning given at ITA07/S995 - see VCM13100.

These conditions are not to be regarded as ceasing to be satisfied by reason only of a winding-up or dissolution of the subsidiary or its parent, or of the subsidiary or its parent going into receivership, or of a disposal of the shares in the subsidiary, provided in all cases that this occurs for genuine commercial reasons and not as part of a scheme or arrangement for the avoidance of tax.