Corporation Tax Act 2010 section 18F

Section 18E(3): treatment of certain non-trading companies

Section 18F provides rules for excluding certain passive holding companies from being counted as associated companies under section 18E(3), where the company carries on a business of making investments but meets strict conditions as a passive company.

• A non-trading investment company with one or more 51% subsidiaries that qualifies as a passive company is treated as not carrying on a business for the purposes of the associated companies test in section 18E(3)
• To be passive, the company must hold no assets other than shares in its 51% subsidiaries, earn no income other than qualifying exempt dividends, accrue no chargeable gains, and have no management expenses or qualifying charitable donations
• If the company receives dividend income, it must redistribute at least an equivalent amount to its own shareholders during the same accounting period, and those dividends must be exempt distributions of a qualifying kind
• Where dividend income meets the qualifying conditions, neither the dividend itself, any asset representing it, nor any right to receive it is treated as an asset of the company for the purposes of the passive company test