Income Tax Act 2007 Schedule 2 paragraph 51

Meaning of "qualifying subsidiary"

Schedule 2 paragraph 51 modifies the definition of "qualifying subsidiary" for the purposes of share loss relief where the shares in question were issued before 17 March 2004.

• For shares issued before 17 March 2004, stricter and more detailed ownership tests apply to determine whether a company counts as a qualifying subsidiary for share loss relief purposes.
• The parent company (or another of its subsidiaries) must hold at least 75% of the subsidiary's issued share capital, voting power, rights to assets on a winding up, and rights to distributable profits.
• If a subsidiary is being wound up or dissolved, this will not prevent it from being a qualifying subsidiary provided the process is for genuine commercial reasons (not tax avoidance) and net assets are distributed to members within the required timeframe.
• The identity of equity holders and their entitlement to assets on distribution is determined using the rules in Chapter 6 of Part 5 of the Corporation Tax Act 2010.