Commentary

D2.109 Definition of a group—calculation of beneficial ownership

Corporate tax
Corporate tax | Commentary

D2.109 Definition of a group—calculation of beneficial ownership

Corporate tax | Commentary

D2.109 Definition of a group—calculation of beneficial ownership

For the legislation governing corporate groups, it is often necessary for one company to have a certain level of ownership in another company in order to form a group. Ownership for these purposes refers to beneficial ownership, either held directly or indirectly.

The legislation provides rules for determining beneficial ownership and assessing whether a company is a 51%, 75% or 90% subsidiary of another1. (Although note that special rules apply when calculating ownership for group capital gains tax purposes (see D2.305)).

For both 51% and 75% subsidiaries, the holdings can be direct or indirect. In contrast 90% subsidiaries must be held directly.

It should be noted that because of an absence of the appropriate beneficial ownership, a parent company in liquidation cannot be part of a group. However, if a subsidiary goes into liquidation, the parent continues to be the beneficial owner of the subsidiary company's shares and the group relationship is maintained.

Beneficial entitlement and groups—meaning of direct and indirect ownership

A direct interest simply refers to the situation when a company directly holds ordinary share capital in another company (for example company A owns 100% of the share capital of company B). The company holding the share capital is referred to as 'the owner'.

Indirect ownership is where a company owns share capital of another company through one or more intermediaries. Using the example above if company B also owned 100% of company C, company A would also indirectly own company C, through company

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