Corporation Tax Act 2010 section 394

Consortium relationships

Section 394 defines what a "principal company" is where a plant or machinery leasing company is owned by a consortium, and sets out when a "relevant change" occurs in the relationship between the leasing company and its principal company.

• A consortium member is a principal company of the leasing company provided it is not itself a 75% subsidiary of another company; if it is, you look up the ownership chain until you find a company that is not a 75% subsidiary — that company is the principal company.
• The "ownership proportion" is the lowest of three percentages: the consortium member's share of ordinary share capital, its entitlement to distributable profits, and its entitlement to assets on a winding up — and where the leasing company is a qualifying 75% subsidiary, these percentages are measured by reference to the parent company rather than the leasing company itself.
• A "relevant change" in the relationship occurs on any day when the ownership proportion at the end of the day is lower than it was at the start of the day, or when a company in the ownership chain ceases to be a qualifying 75% subsidiary of the company above it.
• These rules apply whether the leasing company is directly owned by the consortium or is a qualifying 75% subsidiary of a company owned by the consortium.