Section 242 | Ownership interests and controlling interests

(1)In this Part “ownership interest” means a direct ownership interest or an indirect ownership interest.

(2)An entity or an individual (“A”) has a direct ownership interest in an entity (“B”) if—

(a)A has an interest (whether by way of shares, other security or otherwise) that gives rise to a share of the profits, capital or reserves of B or of a permanent establishment of B (whether on the making of a distribution of profits, winding up or otherwise), and

(b)that interest is accounted for as equity in—^F1

(i)where B is a member of a consolidated group, the consolidated financial statements of the ultimate parent of the group (ignoring any requirement to consolidate the assets, liabilities, income, expenses and cash flows of B in those statements), or^F1

(ii)otherwise, B’s financial statements.^F1

(3)An entity or an individual (“C”) has an indirect ownership interest in an entity (“D”) if C has a direct ownership interest in—

(a)an entity that has a direct ownership interest in D, or

(b)an entity that has (as a result of the single or repeated application of this subsection) an indirect ownership interest in D.

(4)An entity (“R”) has a controlling interest in another entity (“S”) if condition A or B is met.

(5)Condition A is that as a result of an ownership interest R has in S—

(a)R is required to consolidate the assets, liabilities, income, expenses and cash flows of S on a line-by-line basis in accordance with an acceptable ... accounting standard, or^F2

(b)R would have been required to do so if R had prepared consolidated financial statements.

(6)Condition B is that S is a permanent establishment of R.