Income Tax Act 2007 section 257MU

Meaning of "qualifying subsidiary"

Section 257MU defines what makes a company a "qualifying subsidiary" of another company for the purposes of the social investment tax relief rules in Part 5B, including the ownership and control requirements that must be satisfied and the circumstances in which those requirements are not treated as breached.

• A subsidiary qualifies if it is at least 51% owned by the parent, no person other than the parent or its other subsidiaries controls the subsidiary, and no arrangements exist that would cause either condition to fail.
• These conditions are not treated as broken merely because the subsidiary or another company is wound up or dissolved, provided this is for genuine commercial reasons and not part of a tax avoidance arrangement.
• Similarly, entry into administration or receivership does not breach the conditions, as long as the insolvency process and all consequential actions are genuinely commercially motivated and not tax-avoidance driven.
• The conditions also survive the existence of arrangements for the parent or another subsidiary to dispose of its entire interest in the subsidiary, provided the disposal is for genuine commercial reasons and not part of a tax avoidance scheme.