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Part 5U.K.Group relief

Modifications etc. (not altering text)

C1Pt. 5 applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 125 (with s. 147, Sch. 17)

C2Pt. 5 excluded (with effect in accordance with Sch. 18 para. 63 of the amending Act) by Finance Act 2016 (c. 24), Sch. 18 para. 20(5)

C3Pt. 5 modified by 2009 c. 4, s. 1218ZDB(2) (as inserted (for specified purposes and with effect in accordance with Sch. 6 paras. 20, 21(1)(a) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 6 para. 1 (with Sch. 6 para. 21(3)))

C4Pt. 5 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Risk Transformation (Tax) Regulations 2017 (S.I. 2017/1271), regs. 1(1), 10, 11

C5Pt. 5 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 47(4)

Chapter 5U.K.Subsidiaries, groups and consortiums

IntroductionU.K.

150Overview of ChapterU.K.

(1)This Chapter explains how to determine if a company—

(a)is a 75% or 90% subsidiary of another company (see section 151),

(b)is a member of a group of companies (see section 152),

(c)is owned by a consortium (see section 153), or

(d)is a member of a consortium (see section 153).

(2)Sections 154 to 156 qualify those explanations in cases involving transfers of companies.

Explanations of termsU.K.

151Meaning of “75% subsidiary” and “90% subsidiary”U.K.

(1)In this Part “75% subsidiary” and “90% subsidiary” are to be read in accordance with Chapter 3 of Part 24, but subject to subsections (2) to (4).

(2)In applying the definition of “75% subsidiary” in section 1154(3), share capital of a [F1registered society ] is to be treated as if it were ordinary share capital.

(3)If—

(a)a company (“the shareholder”) directly owns shares in another company, and

(b)a profit on the sale of those shares would be a trading receipt of the shareholder,

the shareholder is treated as not being the owner of those shares for the purpose of determining if any company is a 75% subsidiary of any other company.

(4)If a company (“the subsidiary”) would, apart from this subsection, be treated as a 75% or 90% subsidiary of another company (“the parent”) at any time, the subsidiary is not to be so treated unless at that time the parent—

(a)is beneficially entitled to at least 75% or 90% (as the case may be) of any profits available for distribution to equity holders of the subsidiary (see Chapter 6), and

(b)would be beneficially entitled to at least 75% or 90% (as the case may be) of any assets of the subsidiary available for distribution to such equity holders on a winding up (see Chapter 6).

Textual Amendments

Modifications etc. (not altering text)

C7S. 151(4) applied (with effect in accordance with Sch. 16 para. 62 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 16 para. 56(3)

152Groups of companiesU.K.

For the purposes of this Part two companies are members of the same group of companies if—

(a)one is the 75% subsidiary of the other, or

(b)both are 75% subsidiaries of a third company.

153Companies owned by consortiums and members of consortiumsU.K.

(1)For the purposes of this Part a company is owned by a consortium if—

(a)the company is not a 75% subsidiary of any company, and

(b)at least 75% of the company's ordinary share capital is beneficially owned by other companies each of which beneficially owns at least 5% of that capital.

(2)The other companies each owning at least 5% of the share capital are the members of the consortium for the purposes of this Part.

(3)If—

(a)a trading company is a 90% subsidiary of a holding company and is not a 75% subsidiary of any company apart from the holding company, and

(b)as a result of subsection (1), the holding company is owned by a consortium,

then for the purposes of this Part the trading company is also owned by the consortium.

Modifications etc. (not altering text)

C8S. 153 applied by 1998 c. 36, Sch. 18 para. 71A(4) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 116)

Arrangements for transfers of companiesU.K.

154Arrangements for transfer of member of group of companies etcU.K.

(1)This section applies if, apart from this section, one company (“the first company”) and another company (“the second company”) would be members of the same group of companies.

(2)For the purposes of this Part the companies are not members of the same group of companies if—

(a)one of the companies has surrenderable amounts for an accounting period (“the current period”), and

(b)arrangements within subsection (3) are in place.

(3)Arrangements are within this subsection if they have any of the following effects [F2(but see sections [F3155A ] and 155B)].

(4)A “third company” means a company that is not, apart from any arrangements within subsection (3), a member of the same group of companies as the first company.

Textual Amendments

F2Words in s. 154(3) inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(2)

F3Word in s. 154(3) substituted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(2)

Modifications etc. (not altering text)

C9S. 154 applied (with modifications) (with effect in accordance with Sch. 7 para. 40 of the amending Act) by 2010 c. 8, s. 259ZME(3) (as inserted by Finance Act 2021 (c. 26), Sch. 7 para. 15(3))

C10S. 154 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 11

C11S. 154 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 12 (with ss. 15(1), 16(1), 17)

155Arrangements for transfer of company owned by consortium etcU.K.

(1)This section applies if, apart from this section, a trading company would be owned by a consortium.

(2)The trading company is not owned by the consortium if—

(a)for an accounting period (“the current period”) the trading company or a member of the consortium has surrenderable amounts, and

(b)arrangements within subsection (3) are in place.

(3)Arrangements are within this subsection if they have any of the following effects [F4(but see sections [F5155A] and 155B)].

(4)A “third company” means a company that is not, apart from any arrangements within subsection (3), a member of the same group of companies as the trading company.

(5)If the trading company would, apart from this section, be owned by a consortium as a result of section 153(3) (consortiums involving holding companies)—

(a)references in this section (apart from references under Effect 4) to the trading company are to be read as including references to the holding company concerned, and

(b)Effect 3 does not apply if P is that holding company.

Textual Amendments

F4Words in s. 155(3) inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(3)

F5Word in s. 155(3) substituted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(2)

[F6155ACertain arrangements not within sections 154 and 155U.K.

(1)Arrangements entered into by a joint venture company which, apart from this section, would be arrangements within section 154(3) or 155(3) are not to be treated as such arrangements if and so long as—

(a)the arrangements fall within subsection (2), and

(b)none of the contingencies mentioned in subsection (3) to which the arrangements relate has occurred.

(2)Arrangements fall within this subsection if they are—

(a)an agreement which provides for the transfer of shares or securities in the joint venture company to one or more members of that company on, or as a result of, one or more contingencies mentioned in subsection (3) occurring, or

(b)a provision in a constitutional document of the joint venture company which provides for the suspension of a member’s voting rights on, or as a result of, one or more of those contingencies occurring.

(3)The contingencies referred to in subsections (1)(b) and (2) are—

(a)the voluntary departure of a member,

(b)the commencement of the liquidation, administration, administrative receivership or receivership of, or the entering into of a voluntary arrangement by, a member under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 or the commencement, or entering into, of equivalent proceedings or arrangements under the law of any country or territory outside the United Kingdom,

(c)a serious deterioration in the financial condition of a member,

(d)a change of control of a member,

(e)a default by a member in performing its obligations under any agreement between the members or with the joint venture company (which, for this purpose, includes any constitutional document of the joint venture company),

(f)an external change in the commercial circumstances in which the joint venture company operates such that its viability is threatened,

(g)an unresolved disagreement between members, and

(h)any contingency of a similar kind to that mentioned in any of paragraphs (a) to (g) which is provided for, but not intended to happen, when the arrangements in question are entered into.

(4)This section does not apply if a member could alone or together with connected persons dictate the terms or timing of—

(a)the transfer of shares or securities, or

(b)the suspension of a member’s voting rights,

in advance of one or more of the contingencies occurring.

(5)For the purposes of subsection (4) members are not connected with each other by reason only of their membership of the joint venture company.

(6)In this section—

Textual Amendments

F6Ss. 155A, 155B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(1)

Modifications etc. (not altering text)

C12S. 155A applied (with modifications) (with effect in accordance with Sch. 7 para. 40 of the amending Act) by 2010 c. 8, s. 259ZME(3) (as inserted by Finance Act 2021 (c. 26), Sch. 7 para. 15(3))

C13Ss. 155A-156 applied (with modifications) (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 11

C14Ss. 155A-156 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 12 (with ss. 15(1), 16(1), 17)

155BCertain mortgage arrangements not within sections 154 and 155U.K.

(1)Arrangements entered into by a company which, apart from this section, would be arrangements within section 154(3) or 155(3) are not to be treated as such arrangements if and so long as—

(a)the arrangements are a mortgage, secured by way of shares or securities in the company, which on default or the happening of any other event allows the mortgagee to exercise its rights against the mortgagor, and

(b)the mortgagee has not exercised its rights against the mortgagor.

(2)This section does not apply if the mortgagee—

(a)possesses greater rights in respect of the shares or securities which are the subject of the mortgage than it requires to protect its interest as mortgagee, or

(b)could alone or together with connected persons dictate the terms or timing of the default or the happening of any other event which allows it to exercise its rights against the mortgagor.

(3)For the purposes of subsection (2)(b) the mortgagee is not, by reason only of the mortgage, connected with a company whose shares or securities are the subject of the mortgage.

(4)In this section—

Textual Amendments

F6Ss. 155A, 155B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(1)

Modifications etc. (not altering text)

C13Ss. 155A-156 applied (with modifications) (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 11

C14Ss. 155A-156 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 12 (with ss. 15(1), 16(1), 17)

C15S. 155B applied (with modifications) (with effect in accordance with Sch. 7 para. 40 of the amending Act) by 2010 c. 8, s. 259ZME(3) (as inserted by Finance Act 2021 (c. 26), Sch. 7 para. 15(3))

156Sections 154 and 155: supplementaryU.K.

(1)This section applies for the purposes of sections 154 [F7to 155B].

(2)“Arrangements”—

(a)means arrangements of any kind (whether or not in writing), but

(b)does not include [F8]

(i)a power of a Minister of the Crown, the Scottish Ministers or a Northern Ireland department to give directions to a statutory body as to the disposal of assets belonging to the body or to a subsidiary of the body.[F9, or

(ii)a condition or requirement imposed by, or agreed with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body.]

[F10(2A)In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.]

(3)A company is the successor of another company if it carries on a trade which, in whole or in part, the other company used to carry on and the circumstances are such that—

(a)Chapter 1 of Part 22 (transfers of trade without a change of ownership) applies in relation to the companies as, respectively, the successor and the predecessor within the meaning of that Chapter, or

(b)the two companies are connected with each other in accordance with section 1122.

Textual Amendments

F7Words in s. 156(1) substituted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(4)

F8Words in s. 156(2)(b) renumbered as s. 156(2)(b)(i) (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(a)

F9S. 156(2)(b)(ii) and word inserted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(b)

F10S. 156(2A) inserted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(c)

Modifications etc. (not altering text)

C13Ss. 155A-156 applied (with modifications) (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 11

C14Ss. 155A-156 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 12 (with ss. 15(1), 16(1), 17)

C16S. 156 applied (with modifications) (with effect in accordance with Sch. 7 para. 40 of the amending Act) by 2010 c. 8, s. 259ZME(3) (as inserted by Finance Act 2021 (c. 26), Sch. 7 para. 15(3))