Section 1085: Conditions to be met if the distributing company is a 75% subsidiary
3152.This section applies instead of either condition F in section 1082 or condition K in section 1083 if the distributing company is itself a 75% subsidiary. It is based on section 213(12) of ICTA.
3153.Without this section a 75% subsidiary would not be able to meet the overarching requirement in section 1074(1), namely that the outcome of an exempt distribution is that a trade must be divided between two companies not in the same group or two independent groups. The categories of exempt distribution all involve transfers of shares to the members of the distributing company, and in the case of a 75% subsidiary the members would be the immediate holding company. Hence the conditions could not be met as everything would remain within the one group.
3154.The “trading company or group” condition in condition F or K of the relevant section is replaced by a requirement in subsection (1)about the group to which the company belongs.
3155.This section then requires further distributions, each of which must meet all the relevant tests – apart from condition F or K where the distributing company is a 75% subsidiary. The final exempt distribution in this process must therefore be made by a company which is not itself a 75% subsidiary and which is capable of meeting the requirements of section 1074(1).