Section 371BG | Companies holding shares as trading assets etc ^F1

(1)Subsection (2) applies if conditions A to C are met in relation to a relevant interest, or a part of a relevant interest, which a chargeable company (“CC”) has in the CFC at all times during the CFC's accounting period.

(2)Step 5 in section 371BC(1) is to be taken in relation to CC on the following basis.

(3)That basis is—

(a)so much of P% as is attributable to CC having the relevant interest, or the part of a relevant interest, during the CFC's accounting period is to be left out of P%, and

(b)so much of Q% as is so attributable is to be left out of Q%.

(4)Condition A is that, at all times during the CFC's accounting period, CC has the relevant interest, or the part of a relevant interest, by virtue of its holding shares (“the relevant shares”) in the CFC (directly or indirectly).

(5)Condition B is that any increase in the value of the relevant shares at any time during the relevant corporation tax accounting period is (or would be) income, or brought into account in determining any income, of CC chargeable to corporation tax for that period.

(6)Condition C is that any dividend or other distribution received at any time during the relevant corporation tax accounting period by CC from the CFC (directly or indirectly) by virtue of its holding the relevant shares is (or would be) income, or brought into account in determining any income, of CC chargeable to corporation tax for that period.

(7)Subsection (8) applies if—

(a)CC has the relevant interest, or the part of a relevant interest, by virtue of section 371OB(3) or (4),

(b)the CFC is an offshore fund (as defined in section 355) which does not meet the qualifying investments test in section 493 of CTA 2009, and

(c)conditions B and C would be met but for the offshore fund not meeting that test.

(8)Conditions B and C are to be taken to be met.

(9)This section is subject to section 371BH.