Income Tax Act 2007 section 139

The control and independence requirement

Section 139 sets out two requirements — control and independence — that a company must satisfy in order to be treated as a qualifying trading company for the purposes of share loss relief.

• The company must not control any company that is not a qualifying subsidiary, whether on its own or together with a connected person, and no arrangements must exist that could cause this to be breached.
• The company must not be a 51% subsidiary of another company, nor be under the control of another company (or that company together with connected persons), and again no arrangements must exist that could undermine this independence.
• Both elements must be met throughout the continuous period required by section 134(3), and the section is subject to the special rule in section 145(3) dealing with share-for-share exchanges.
• "Control" for the control element follows the close company definition in sections 450 and 451 of CTA 2010, while "arrangements" covers any scheme, agreement or understanding whether or not legally enforceable.