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HMRC internal manual

Venture Capital Schemes Manual

SEIS: income tax relief: issuing company: qualifying subsidiaries requirement


At any time in period B (see VCM31140) any subsidiary of the issuing company must be a qualifying subsidiary.

Meaning of ‘qualifying subsidiary’

‘Qualifying subsidiary’ is defined at ITA07/S257HJ and has the same meaning as for EIS relief under ITA07/S191.

A company is a qualifying subsidiary if it is a 51 percent subsidiary of the investee company. The meaning of 51 percent subsidiary is the same as that given in CTA10/S1154. That is, the investee company must directly or indirectly hold more than 50 percent 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 (see below), and there must be no arrangements by virtue of which that requirement could cease to be met.

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.

‘Control’ for this purpose has the meaning given at ITA07/S995. That is, the power of any person by means of the holding or shares or voting power, or as a result of any powers conferred by a document regulating the company or any other company, that the affairs of the company are conducted in accordance with the person’s wishes.

See VCM34040 for the meaning of ‘qualifying 90 percent subsidiary’.