Income Tax Act 2007 section 257MV

Meaning of "90% social subsidiary" of a social enterprise

Section 257MV defines what it means for a company to qualify as a "90% social subsidiary" of a social enterprise, setting out ownership, control and entitlement thresholds that must be met, along with provisions for indirect subsidiary relationships and exceptions for genuine commercial events.

• The parent must hold at least 90% of the subsidiary's issued share capital and voting power, and the subsidiary must itself be a social enterprise
• The parent must be entitled to at least 90% of the subsidiary's distributable assets (on winding up or otherwise) and at least 90% of its distributable profits, with no other person having control
• Indirect 90% social subsidiary status can arise through a chain of two companies, provided one link in the chain meets the 90% test and the other meets a 100% test
• The qualifying conditions are not broken merely because of a genuine commercial winding up, administration, receivership or planned disposal, provided these are not part of tax avoidance arrangements