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CTM81110 | Groups & consortia: groups - entitlement to profits or assets available for distribution: option, limited & varying rights: referable to UK trade of non-resident company

From HM Revenue & Customs · Company Taxation Manual

CTA10/S179 and S180

FA00 introduced additional rules in CTA10/S179 and S180. They apply from 1 April 2000 for the purposes of:

  • determining 75% and 90% subsidiary relationships where a company either surrendering or claiming group relief (CTM80100 onwards) or consortium relief (CTM80500 onwards) is not resident in the UK, and

  • working out a consortium member’s share in a consortium (CTM80540 and CTM80545), where a company owned by the consortium (CTM80530) is not resident in the UK and either claims or surrenders consortium relief.The rules apply in cases where:

  • any equity holder holds shares or securities with rights (to dividends, interest or assets on a winding up) which depend in any way on to the extent to which profits or assets distributed are referable to the trade of the UK permanent establishment of the non-resident company, or

  • CTA10/S173 option arrangements (CTM81090) exist and either or both of the percentages described in CTM81095, being:

  • a percentage of the profits of the non-resident company to which the equity holders would be entitled, or

  • a percentage of the assets of the non-resident company to which the equity holders would be entitled on a notional winding up,would differ at any time according to the extent to which profits or assets distributed are referable to the trade of the UK permanent establishment of the non-resident company.

    Profits or assets are referable to the trade of a UK permanent establishment only to the extent that:

  • they are used for or attributable to activities any profits from which are or would be within the charge to CT, and

  • are not used or attributable to activities any profits from which are or would be exempted from CT by a bilateral double tax agreement.

  • the percentage entitlement of an equity holder to profits or assets if these were distributed by reference to the non-resident company as an entity, and

  • the percentage entitlement of an equity holder to profits or assets if these were distributed by reference only to the UK permanent establishment of the non-resident company,as part of the various Part 5 Chapter 6 tests.

    (This content has been withheld because of exemptions in the Freedom of Information Act 2000)