Income Tax (Earnings and Pensions) Act 2003 Schedule 5 paragraph 11

Meaning of "qualifying subsidiary"

Schedule 5 paragraph 11 defines what makes a company a "qualifying subsidiary" of a holding company for the purposes of the Share Incentive Plan rules, including protections during winding up, disposal, administration or receivership.

• A qualifying subsidiary must be a 51% subsidiary of the holding company, with no outside party having control and no arrangements in place that would undermine these conditions.
• A winding up does not disqualify the subsidiary provided it is carried out for genuine commercial reasons and is not part of a tax avoidance scheme.
• Arrangements to dispose of the holding company's (or another subsidiary's) entire interest in the subsidiary do not break the conditions, provided the disposal is commercially motivated and not tax-avoidance driven.
• Administration or receivership does not cause the subsidiary to lose its qualifying status, as long as the entry into that process and all consequent actions are for commercial reasons and not part of a tax avoidance arrangement.