Corporation Tax Act 2010 section 1085

Conditions to be met if the distributing company is a 75% subsidiary

Section 1085 sets out the additional conditions that must be satisfied for a distribution to qualify as an exempt distribution (demerger) where the distributing company is itself a 75% subsidiary of another company.

• The group to which the distributing company belongs at the time of the distribution must be a trading group (or, where there is more than one group, the largest group must be a trading group).
• The original distribution must be followed by one or more further exempt distributions that ultimately result in the members of the top holding company becoming members of the demerged entities.
• This section replaces the normal "trading company or group" conditions (Condition F or Condition K) that would otherwise apply, because a 75% subsidiary cannot satisfy those conditions on its own.
• The chain of further distributions must continue until a company that is not itself a 75% subsidiary makes the final exempt distribution, at which point the normal requirement for a trade to end up divided between two independent companies or groups can be met.