Corporation Tax Act 2010 section 405

Adjustment to the basic amount: qualifying 75% subsidiaries

Section 405 explains how to reduce the basic amount of taxable income from long funding leases when a company ceases to be a 75% subsidiary but retains a partial ownership connection through a consortium arrangement.

• The section applies where company A ceases to be a qualifying 75% subsidiary of company B but on the same day either becomes owned by a consortium that includes B, or becomes a 75% subsidiary of a company owned by such a consortium.
• The basic amount is reduced so that the taxable income is limited to the "appropriate percentage", calculated as 100% minus the "ownership percentage" that B retains at the end of the day of the change.
• The ownership percentage is the lowest of three measures: B's share of A's ordinary share capital, B's entitlement to distributable profits of A, and B's entitlement to assets of A on a winding up.
• Where company A becomes a 75% subsidiary of another company owned by the consortium, the ownership percentage is calculated by reference to that intermediate company rather than to A directly.