Income and Corporation Taxes Act 1970 (repealed 6.4.1992)

272 Groups of companies: definitions. U.K.

(1) [F1 Except as otherwise provided, for] the purposes of this and the following sections of this Chapter—

(a) references to a company, [F2 subject to section 280(7) below], apply only to a company, as that expression is limited by subsection (2) below, which is resident in the United Kingdom;

[F3 (b) subsections (1A) and (1D) below apply to determine whether companies form a group and, where they do, which is the principal company of the group;]

(d) in applying the definition of “75 per cent. subsidiary” in section [F4 838 of the Taxes Act 1988] any share capital of a registered industrial and provident society shall be treated as ordinary share capital; and

(e) “group” and “subsidiary” shall be construed with any necessary modifications where applied to a company incorporated under the law of a country outside the United Kingdom.

[F5 (1A) Subject to subsections (1B) to (1D) below—

(a) a company (referred to below in this Chapter as the “principal company of the group”) and all its 75 per cent. subsidiaries form a group and, if any of those subsidiaries have 75 per cent. subsidiaries, the group includes them and their 75 per cent. subsidiaries, and so on, but

(b) a group does not include any company (other than the principal company of the group) that is not an effective 51 per cent. subsidiary of the principal company of the group.

(1B) A company cannot be the principal company of a group if it is itself a 75 per cent. subsidiary of another company.

(1C) Where a company (“the subsidiary") is a 75 per cent. subsidiary of another company but those companies are prevented from being members of the same group by subsection (1A)(b) above, the subsidiary may, where the requirements of subsection (1A) above are satisfied, itself be the principal company of another group notwithstanding subsection (1B) above unless this subsection enables a further company to be the principal company of a group of which the subsidiary would be a member.

(1D) A company cannot be a member of more than one group; but where, apart from this subsection, a company would be a member of two or more groups (the principal company of each group being referred to below as the “head of a group"), it is a member only of that group, if any, of which it would be a member under one of the following tests (applying earlier tests in preference to later tests)—

(a) it is a member of the group it would be a member of if, in applying subsection (1A)(b) above, there were left out of account any amount to which a head of a group is or would be beneficially entitled of any profits available for distribution to equity holders of a head of another group or of any assets of a head of another group available for distribution to its equity holders on a winding-up,

(b) it is a member of the group the head of which is beneficially entitled to a percentage of profits available for distribution to equity holders of the company that is greater than the percentage of those profits to which any other head of a group is so entitled,

(c) it is a member of the group the head of which would be beneficially entitled to a percentage of any assets of the company available for distribution to its equity holders on a winding-up that is greater than the percentage of those assets to which any other head of a group would be so entitled,

(d) it is a member of the group the head of which owns directly or indirectly a percentage of the company’s ordinary share capital that is greater than the percentage of that capital owned directly or indirectly by any other head of a group (interpreting this paragraph as if it were included in section 838(1)(a) of the Taxes Act 1988).

(1E) For the purposes referred to in subsection (1) above, a company (“the subsidiary") is an effective 51 per cent. subsidiary of another company (“the parent") at any time if and only if—

(a) the parent is beneficially entitled to more than 50 per cent. of any profits available for distribution to equity holders of the subsidiary; and

(b) the parent would be beneficially entitled to more than 50 per cent. of any assets of the subsidiary available for distribution to its equity holders on a winding-up.

(1F) Schedule 18 to the Taxes Act 1988 (group relief: equity holders and profits or assets available for distribution) shall apply for the purposes of subsections (1D) and (1E) above as if the references to subsection (7), or subsections (7) to (9), of section 413 of that Act were references to subsections (1D) and (1E) above and as if, in paragraph 1(4), the words from “but" to the end [F6 paragraphs 5(3) and 7(1)(b) were omitted].]

(2) For the purposes referred to in subsection (1) above references to a company apply only to—

(a) a company within the meaning of the [F7 Companies Act 1985] or the corresponding enactment in Northern Ireland, and

(b) a company which is constituted under any other Act or a Royal Charter or letters patent or (although resident in the United Kingdom) is formed under the law of a country or territory outside the United Kingdom, and

(c) a registered industrial and provident society within the meaning of section [F8 486 of the Taxes Act 1988][F9 ; and

(d) a trustee savings bank as defined in section 54(1) of the Trustee Savings Banks Act 1981]; [F10 and

(e) a building society within the meaning of the Building Societies Act 1986].

(3) For the purposes referred to in subsection (1) above a group remains the same group so long as the same company remains the principal company of the group, and if at any time the principal company of a group becomes a [F11 member of another group, the first group and the other group shall be regarded as the same], and the question whether or not a company has ceased to be a member of a group shall be determined accordingly.

(4) For the purposes referred to in subsection (1) above the passing of a resolution or the making of an order, or any other act, for the winding-up of [F12 a member of a group of companies] shall not be regarded as the occasion of [F12 that or any other company ceasing to be a member of the group.]

(5) The following sections of this Chapter, except in so far as they relate to recovery of tax, shall also have effect in relation to bodies from time to time established by or under any enactment for the carrying on of any industry or part of an industry, or of any undertaking, under national ownership or control as if they were companies within the meaning of those sections, and as if any such bodies charged with related functions (and in particular the Boards and Holding Company established under the M1 Transport Act 1962 and the new authorities within the meaning of the M2 Transport Act 1968 established under that Act of 1968) and subsidiaries of any of them formed a group, and as if also any two or more such bodies charged at different times with the same or related functions were members of a group:

Provided that this subsection shall have effect subject to any enactment by virtue of which property, rights, liabilities or activities of one such body fall to be treated for corporation tax as those of another, including in particular any such enactment in Chapter [F8 VI of Part XII of the Taxes Act 1988].

(6) The following sections of this Chapter, except in so far as they relate to recovery of tax, shall also have effect in relation to [F13 the London Transport Executive and] the Executive for a designate area within the meaning of section 9(1) of the M3 Transport Act 1968 as if [F14 that Executive] were a company within the meaning of those sections.

Textual Amendments

F1 Words substituted by Finance Act 1990 (c. 29), s. 70(2)(a) in relation to disposals on or after March 20th 1990.

F2 Words repealed by Finance Act 1990 (c. 29), s. 70(2)(b), Sch. 19 Pt. IV in relation to disposals on or after March 20th 1990.

F3 S. 272(1)(b) substituted for s. 272(1)(b)(c) by Finance Act 1989 (c. 26), s. 138 on and after March 14th 1989 subject to s. 138(10)(11).

F4 Words substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29 para. 32.

F5 S. 272(1A)–(1F) inserted by Finance Act 1989 (c. 26), s. 138(2) on and after March 14th 1989 subject to s. 138(10)(11).

F6 Words substituted by Finance Act 1990 (c. 29), s. 86(1). Principal company of a group can under certain circumstances elect for subs. (1F) not to apply when membership of a group is considered.

F7 Words substituted by Companies Consolidation (Consequential Provisions) Act 1985 (c. 9), s. 30, Sch. 2 with effect from July 1st 1985.

F8 Words substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29 para. 32.

F9 S. 272(2)(d) and word “and" immediately preceding it inserted by Finance Act 1984 (c. 43), s. 44(2)— deemed to have come into force on November 21st 1982.

F10 S. 272(e) and word “and" immediately preceding it inserted by Finance (No. 2) Act 1987 (c. 51), s. 79.

F11 Words substituted by Finance Act 1989 (c. 26), s. 138(3). Changes apply from March 14th 1989 subject to s. 138(10)(11).

F12 Words substituted by Finance Act 1989 (c. 26), s. 138(4). Changes apply on and after March 14th 1989 subject to s. 138(10)(11).

F13 Words inserted by Finance Act 1970 (c. 24, SIF 63:1, 2), s. 16(4), Sch. 3 para. 8(2) and repealed by London Regional Transport Act 1984 (c. 32), s. 71(3), Sch. 6 para. 7 and Sch. 7 on and after June 29th 1984 by S.I. 1984 No. 877.

F14 Words substituted by London Regional Transport Act 1984 (c. 32), s. 71(3)(a), Sch. 6 para. 7 on and after June 29th 1984 by S.I. 1984 No. 877.

Modifications etc. (not altering text)

C1 See Finance Act 1974 (c. 30), s. 41(10), s. 272 applied for purposes of s. 41(8)(9) (development gains: indirect disposals); s. 45(4), Sch. 9 para. 11(3) of the Act of 1974— s. 272 applied for purposes of para. 11 (first letting after material development: groups of companies) and Finance (No. 2) Act 1975 (c. 45), s. 58(10) for application of definition of “group" for purposes of s. 58 (disposal of shares and securities within prescribed period of acquisition after April 14th 1975).

C2 See Capital Gains Tax Act 1979 (c. 14, SIF 63:2), s.70(7), for application of definition of “group" for purposes of s. 70 (losses on disposals of giltedged securities replaced within prescribed period); Finance Act 1982 (c. 39), s. 89(6), s. 272 applied for purposes of s. 89 (rules for identification of securities) and Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), s. 347(5)— applied for purposes of s. 347 (groups).

C3 See Finance Act 1988 (c. 39, SIF 63:1, 2), s. 132, for application of definition of “group" applied in a modified form for purposes of s. 132 (unpaid tax); Sch. 12 para. 4 of the Act of 1988 for application of definition of “group" for purposes of Sch. 12 (building societies); Finance Act 1989 (c. 26), s. 134 for application of definition of “group" to non-payment of tax by non-residents and Finance Act 1990 (c. 29), s. 32(10)— for application of definition of “group" for purposes of ss. 31 and 32 (employee share ownership trusts).

C4 Ss. 272-281: definition of "effective 51 percent. subsidiary" applied (E.W.S.) by Ports Act 1991 (c. 52, SIF 58), s. 17(13)

C5 See Finance Act 1973 (c. 51), s. 38(5), s. 272(1)(a) and (2) not applicable for purposes of ss. 273 to 275 and 278 to 279 in relation to certain disposals of offshore exploration or exploitation rights.

C6 See Income and Corporation Taxes Act 1970 (c. 10, SIF 63:1), s. 268A(6), postponement of charge on transfer of assets to non-resident company.

C7 See Finance (No. 2) Act 1975 (c. 45), s. 54, Sch. 10 para. 16(3),definition of “group" applied in relation to relief for increase in value of trading stock and work in progress in base periods mentioned in Sch. 10 para. 2. See also Finance Act 1976 (c. 40), Sch. 5 para. 29(3) regarding application of definition of group.

C8 See Capital Gains Tax Act 1979 (c. 14, SIF 63:2), ss. 26–26C— application of definition in relation to value shifting provisions.

C9 S. 54(1) of the Trustee Savings Banks Act 1981 (c. 65) defines a trustee savings bank as “a bank certified under this Act, the Trustee Savings Banks Act 1969, the Trustee Savings Banks Act 1954 or the Trustee Savings Banks Act 1863".

C10 See Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), s. 513(3)— successor companies to British Airways Board and National Freight Corporation not to be regarded as within s. 272(5) by reason only of the provisions of s. 513 and Gas Act 1986 (c. 44), s. 60(2) s. 272(5) not to apply to successor companies to the British Gas Corporation by virtue of s. 60(1) of that Act.

Marginal Citations

M1 1962 c. 46.

M2 1968 c. 73.

M3 1968 c. 73.