Income Tax Act 2007 section 302

Meaning of "qualifying subsidiary"

Section 302 defines what constitutes a "qualifying subsidiary" for the purposes of the Enterprise Investment Scheme, setting out ownership and control conditions together with safeguards for genuine commercial events such as winding up, administration, or disposal.

• The subsidiary must be at least 51% owned by the relevant company, with no outside party having control of it, and no arrangements in place that could cause these conditions to fail.
• A winding up of the subsidiary or any other company does not break qualifying subsidiary status, provided it is carried out for genuine commercial reasons and is not part of a tax avoidance scheme.
• Entry into administration or receivership, and anything done as a consequence, does not break qualifying subsidiary status if undertaken for genuine commercial reasons and not as part of a tax avoidance arrangement.
• Arrangements for the relevant company or another of its subsidiaries to dispose of all its interest in the subsidiary do not break qualifying subsidiary status, so long as the disposal is for genuine commercial reasons and not part of a tax avoidance scheme.