SolvedBLM80310 | Sale of lessor companies and similar arrangements: establishing change of ownership: identifying the principal company - groups
From HM Revenue & Customs · Business Leasing Manual
CTA2010 S393
The legislation establishes the identity of the principal company by looking upwards from Company A (the lessor company) and establishing whether Company A is a 75% subsidiary of another company.
This principle is illustrated in the following examples.
Example 1
B Ltd is a principal company of A Ltd.
But A Ltd might not be in such a simple group relationship.
The legislation deals with more complex structures by tracing upwards from A Ltd and identifying each 75% subsidiary relationship so that a chain of ownership can be established. Wherever there is a 75% subsidiary relationship between a company and another company above it there is a link in a chain of ownership. When you reach a company that is not a 75% subsidiary of another company no higher links in the chain can be found, the chain stops and the top company is the principal company.
A Ltd is a 100% subsidiary of B Ltd but B Ltd is a 100% subsidiary of C Ltd. C Ltd is not a 75% subsidiary of another company so C Ltd is the principal company of A Ltd.
Example 3
The test looks at one link of the chain at a time so that in this example:
A Ltd is a 75% subsidiary of B Ltd. B Ltd is a 75% subsidiary of C Ltd. C Ltd is not a 75% subsidiary of another company so C Ltd is the principal company of A Ltd. It does not matter that A Ltd is not a 75% subsidiary of C Ltd as defined for the purpose of group relief.