Section 18M — Corporation Tax Act 2010: Interpretation of section 18L(3)

Interpretation of section 18L(3) 18M 1 This section applies for the purposes of section 18L(3).

2 In addition to meeting the requirements of section 1154(2), a company (“A”) is a 51% subsidiary of another company (“B”) only at times when—

a B would be beneficially entitled to more than 50% of any profits available for distribution to equity holders of A, and b B would be beneficially entitled to more than 50% of any assets of A available for distribution to its equity holders on a winding up.

3 In determining whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not owning share capital if—

a it owns the share capital indirectly, b the share capital is owned directly by a company (“D”),

and c a profit on the sale of the shares would be a trading receipt for D.

4 A company is a “trading company” if its business consists wholly or mainly of carrying on one or more trades.

5 A company is a “relevant holding company” if its business consists wholly or mainly of holding shares in or securities of trading companies (as defined by subsection (4)) that are its 90% subsidiaries.

6 A company is a “quasi-subsidiary” of R if—

a it is owned by a consortium of which R is a member, b it is not a 75% subsidiary of any company, and c no arrangements of any kind (whether in writing or not) exist as a result of which it could become a 75% subsidiary of any company.

7 A company is owned by a consortium if at least 75% of the company's ordinary share capital is beneficially owned by two or more companies each of which—

a beneficially owns at least 5% of that capital, b would be beneficially entitled to at least 5% of any profits available for distribution to equity holders of the company, and c would be beneficially entitled to at least 5% of any asset of the company available for distribution to its equity holders on a winding up.

8 The companies meeting those conditions are called the members of the consortium.

9 Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of this section as it applies for the purposes of section 151(4)(a) and (b).