SCHEDULES
SCHEDULE 5Enterprise management incentives
Part 3Qualifying companies
11Meaning of “qualifying subsidiary”
1
A company (“the subsidiary”) is a qualifying subsidiary of a company (“the holding company”) if the following conditions are met.
2
The conditions are—
a
that the holding company possesses not less than 75% of the issued share capital of, and not less than 75% of the voting power in, the subsidiary;
b
that the holding company would—
i
in the event of a winding up of the subsidiary, or
ii
in any other circumstances,
be beneficially entitled to receive not less than 75% of the assets of the subsidiary which would then be available for distribution to the shareholders of the subsidiary;
c
that the holding company is beneficially entitled to not less than 75% of any profits of the subsidiary which are available for distribution to the shareholders of the subsidiary;
d
that no person other than the holding company has control of the subsidiary; and
e
that no arrangements are in existence by virtue of which the conditions in paragraphs (a) to (d) would cease to be met.
3
In sub-paragraph (2) any reference to the holding company is to be read as a reference to—
a
the holding company by itself,
b
the holding company and one or more other subsidiaries of the holding company, or
c
one or more other subsidiaries of the holding company.
4
Sub-paragraph (5) applies at a time when the subsidiary or another company is being wound up.
5
The subsidiary is not to be regarded as having ceased, on account of the winding up, to be a company in relation to which the conditions in sub-paragraph (2) are met if—
a
the conditions in that sub-paragraph would be met apart from the winding up, and
b
the winding up is for commercial reasons and is not part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.
6
Sub-paragraph (7) applies at a time when arrangements are in existence for the disposal by—
a
the holding company, or
b
another subsidiary of the holding company,
of all of its interest in the subsidiary.
7
The subsidiary is not to be regarded as having ceased, on account of those arrangements, to be a company in relation to which the conditions in sub-paragraph (2) are met if the disposal is to be for commercial reasons and is not to be part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.