Section 405 — Corporation Tax Act 2010: Adjustment to the basic amount: qualifying 75% subsidiaries

Adjustment to the basic amount: qualifying 75% subsidiaries 405 1 This section applies if—

a the qualifying change of ownership occurs on any day as a result of section 393 (qualifying 75% subsidiaries),

b the change occurs by reference to a company (“A”) ceasing to be a qualifying 75% subsidiary of another company (“B”) on that day, and c on that day A meets one of the conditions in subsection (2).

2 The conditions are—

a that A becomes owned by a consortium of which B is a member, or b that A becomes a qualifying 75% subsidiary of a company owned by a consortium of which B is a member.

3 The basic amount is adjusted so that the amount of the income is limited to the appropriate percentage of the basic amount.

4 The appropriate percentage is found by subtracting the ownership percentage at the end of the day from 100%.

5 For this purpose “the ownership percentage” is whichever is the lowest of the following percentages—

a the percentage of the ordinary share capital of A that is beneficially owned by B, b the percentage to which B is beneficially entitled of any profits available for distribution to equity holders of A, and c the percentage to which B would be beneficially entitled of any assets of A available for distribution to its equity holders on a winding up.

6 But if A becomes a qualifying 75% subsidiary of a company, subsection (5) is to be read as if references to that company were substituted for references to A.