House of Commons portcullis
House of Commons
Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill


Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988

528

 

(iii)   

the qualifying subsidiaries requirement (see section

576E), and

(iv)   

the property managing subsidiaries requirement (see

section 576F), or

(b)   

has ceased to meet any of those requirements at a time which

5

is not more than 3 years before that date and has not since

that time been an excluded company, an investment

company or a trading company.

(3)   

Condition B is that the company either—

(a)   

has met each of the requirements mentioned in condition A

10

for a continuous period of 6 years ending on that date or at

that time, or

(b)   

has met each of those requirements for a shorter continuous

period ending on that date or at that time and has not before

the beginning of that period been an excluded company, an

15

investment company or a trading company.

(4)   

Condition C is that the company—

(a)   

met the gross assets requirement (see section 576G) both

immediately before and immediately after the issue of the

shares in respect of which the relief is claimed under this

20

Chapter, and

(b)   

met the unquoted status requirement (see section 576H) at

the relevant time within the meaning of that section.

(5)   

Condition D is that the company has carried on its business wholly

or mainly in the United Kingdom throughout the period—

25

(a)   

beginning with the incorporation of the company or, if later,

12 months before the shares in question were issued, and

(b)   

ending with the date of the disposal.”

122        

After section 576A insert —

“Qualifying trading companies: the requirements

30

576B    

The trading requirement

(1)   

The trading requirement is that—

(a)   

the company, disregarding any incidental purposes, exists

wholly for the purpose of carrying on one or more qualifying

trades, or

35

(b)   

the company is a parent company and the business of the

group does not consist wholly or as to a substantial part in the

carrying on of non-qualifying activities.

(2)   

If the company intends that one or more other companies should

become its qualifying subsidiaries with a view to their carrying on

40

one or more qualifying trades—

(a)   

the company is treated as a parent company for the purposes

of subsection (1)(b), and

(b)   

the reference in subsection (1)(b) to the group includes the

company and any existing or future company that will be its

45

qualifying subsidiary after the intention in question is carried

into effect.

 

 

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988

529

 

   

This subsection does not apply at any time after the abandonment of

that intention.

(3)   

For the purpose of subsection (1)(b) the business of the group means

what would be the business of the group if the activities of the group

companies taken together were regarded as one business.

5

(4)   

For the purpose of determining the business of a group, activities are

disregarded to the extent that they are activities carried on by a

mainly trading subsidiary otherwise than for its main purpose.

(5)   

For the purposes of determining the business of a group, activities of

a group company are disregarded to the extent that they consist in—

10

(a)   

the holding of shares in or securities of a qualifying

subsidiary of the parent company,

(b)   

the making of loans to another group company,

(c)   

the holding and managing of property used by a group

company for the purpose of one or more qualifying trades

15

carried on by a group company, or

(d)   

the holding and managing of property used by a group

company for the purpose of research and development from

which it is intended—

(i)   

that a qualifying trade to be carried on by a group

20

company will be derived, or

(ii)   

that a qualifying trade carried on or to be carried on

by a group company will benefit.

(6)   

Any reference in subsection (5)(d)(i) or (ii) to a group company

includes a reference to any existing or future company which will be

25

a group company at any future time.

(7)   

In this section—

“excluded activities” has the meaning given by section 192 of

ITA 2007 read with sections 193 to 199 of that Act,

“group” means a parent company and all its qualifying

30

subsidiaries,

“group company”, in relation to a group, means the parent

company or any of its qualifying subsidiaries,

“incidental purposes” means purposes having no significant

effect (other than in relation to incidental matters) on the

35

extent of the activities of the company in question,

“mainly trading subsidiary” means a subsidiary which, apart

from incidental purposes, exists wholly for the purpose of

carrying on one or more qualifying trades, and any reference

to the main purpose of such a subsidiary is to be read

40

accordingly,

“non-qualifying activities” means—

(a)   

excluded activities, and

(b)   

activities (other than research and development)

carried on otherwise than in the course of a trade,

45

“parent company” means a company that has one or more

qualifying subsidiaries,

“qualifying subsidiary” is to be read in accordance with section

191 of ITA 2007,

 

 

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988

530

 

“qualifying trade” has the meaning given by section 189 of that

Act,

“research and development” has the meaning given by section

837A.

(8)   

In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by

5

subsection (7) for the purposes of the definitions of “excluded

activities” and “qualifying trade”) “period B” means the continuous

period that is relevant for the purposes of section 576A(3).”

123        

After section 576B insert—

“576C   

Ceasing to meet the trading requirement because of administration or

10

receivership

(1)   

A company is not regarded as ceasing to meet the trading

requirement by reason only of anything done in consequence of the

company or any of its subsidiaries being in administration or

receivership.

15

   

This has effect subject to subsections (2) and (3).

(2)   

Subsection (1) applies only if—

(a)   

the entry into administration or receivership, and

(b)   

everything done as a result of the company concerned being

in administration or receivership,

20

   

is for genuine commercial reasons, and is not part of a scheme or

arrangement the main purpose or one of the main purposes of which

is the avoidance of tax.

(3)   

A company ceases to meet the trading requirement if before the time

that is relevant for the purposes of section 576A(2)—

25

(a)   

a resolution is passed, or an order is made, for the winding up

of the company or any of its subsidiaries (or, in the case of a

winding up otherwise than under the Insolvency Act 1986 or

the Insolvency (Northern Ireland) Order 1989, any other act

is done for the like purpose), or

30

(b)   

the company or any of its subsidiaries is dissolved without

winding up.

   

This is subject to subsection (4).

(4)   

Subsection (3) does not apply if —

(a)   

the winding up is for genuine commercial reasons, and is not

35

part of a scheme or arrangement the main purpose or one of

the main purposes of which is the avoidance of tax, and

(b)   

the company continues, during the winding up, to be a

trading company.

(5)   

References in this section to a company being “in administration” or

40

“in receivership” are to be read in accordance with section 252 of ITA

2007.”

124        

After section 576C insert—

“576D   

The control and independence requirement

(1)   

The control element of the requirement is that—

45

 

 

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988

531

 

(a)   

the company must not control (whether on its own or

together with any person connected with it) any company

which is not a qualifying subsidiary of the company, and

(b)   

no arrangements must be in existence by virtue of which the

company could fail to meet paragraph (a) (whether at a time

5

during the continuous period that is relevant for the

purposes of section 576A(3) or otherwise).

(2)   

The independence element of the requirement is that—

(a)   

the company must not—

(i)   

be a 51% subsidiary of another company, or

10

(ii)   

be under the control of another company (or of

another company and any other person connected

with that other company), without being a 51%

subsidiary of that other company, and

(b)   

no arrangements must be in existence by virtue of which the

15

company could fail to meet paragraph (a) (whether at a time

during the continuous period that is relevant for the

purposes of section 576A(3) or otherwise).

(3)   

This section is subject to section 576J(3).

(4)   

In this section—

20

“arrangements” includes any scheme, agreement or

understanding, whether or not legally enforceable,

“control” is to be read as follows—

(a)   

in subsection (1)(a), in accordance with section 416(2)

to (6),

25

(b)   

in subsection (2)(a), in accordance with section 840,

“qualifying subsidiary” is to be read in accordance with section

191 of ITA 2007.”

125        

After section 576D insert—

“576E   

The qualifying subsidiaries requirement

30

(1)   

The qualifying subsidiaries requirement is that any subsidiary that

the company has must be a qualifying subsidiary of the company.

(2)   

In this section “qualifying subsidiary” is to be read in accordance

with section 191 of ITA 2007.”

126        

After section 576E insert—

35

“576F   

The property managing subsidiaries requirement

(1)   

The property managing subsidiaries requirement is that any

property managing subsidiary that the company has must be a

qualifying 90% subsidiary of the company.

(2)   

In this section—

40

“property managing subsidiary” has the meaning given by

section 188(2) of ITA 2007,

“qualifying 90% subsidiary” has the meaning given by section

190 of that Act.”

127        

After section 576F insert—

45

 

 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2007
Revised 5 February 2007