Corporation Tax Act 2010 section 724

Disregard of change in company ownership

Section 724 provides that certain changes in the ownership of a subsidiary company can be ignored for the purposes of the loss restriction and other anti-avoidance rules in Chapters 2 to 6, where the subsidiary remains within the same group.

• A change in direct ownership of a subsidiary is disregarded if, both before and after the change, it remains a qualifying 75% subsidiary of the same parent company.
• A qualifying 75% subsidiary must satisfy three conditions: it must be a 75% subsidiary, and the parent must be entitled to at least 75% of distributable profits and at least 75% of assets on a winding up.
• This rule applies to internal group reorganisations where the ultimate parent's economic interest in the subsidiary is unchanged despite a change in the direct shareholding structure.
• The definitions of equity holders and distributable profits or assets follow the same rules used elsewhere in the Act for determining group relationships.