Section 1041 — Corporation Tax Act 2010: Section 1040: effect of entitlement to profits

Section 1040: effect of entitlement to profits 1041 1 The seller's interest as a shareholder in the purchaser's group is not taken to be substantially reduced if—

a the seller would, if every member of the group distributed all its profits available for distribution immediately after the purchase (including any profits received by it on a distribution by another member), be entitled to a share of the profits of one or more of them, and b the new entitlement exceeds 75% of the old entitlement.

2 In subsection (1)— “ the new entitlement ” means the share, or the aggregate of the shares, mentioned in subsection (1)(a), expressed as a fraction of the aggregate of the profits available for distribution of every member of the group which is—

a relevant company, or a 51% subsidiary of a relevant company, and “ the old entitlement ” means the corresponding fraction immediately before the purchase.

3 Subsections (2) to (5) of section 1038 apply for the purposes of this section as they apply for the purposes of section 1038(1).