Corporation Tax Act 2010 section 166

Proportion of assets available for distribution to which company is entitled

Section 166 sets out how to determine what share of another company's assets a parent company would be entitled to receive if the subsidiary were wound up, for the purposes of the group relief equity holder tests.

• The proportion is based on a hypothetical winding up of the subsidiary, using its net assets (assets minus liabilities to non-equity holders) from the balance sheet at the end of the relevant accounting period, or a notional figure of £100 if net assets are nil or negative, or if no balance sheet exists for that date.
• Any amount an equity holder would receive in the winding up is included in the calculation, even if it would not normally count as a distribution of assets.
• Where an equity holder has provided new consideration for shares or securities in the subsidiary, but the subsidiary has effectively returned that consideration by making a loan to, or acquiring shares in, the equity holder or a connected person, the returned amount is deducted from both the subsidiary's total assets and the equity holder's entitlement.
• This calculation is relevant to several group relief ownership tests and is also applied by cross-reference in the rules for small profits relief.