188体育

CTA2010/S394

Special rules are needed to deal with changes in consortium relationships. These changes might be used to shift access to losses.

In this example A Ltd, the lessor company, is owned 74% by E Ltd and 26% by Z Ltd. If E Ltd is a member of a profit making group 74% of the early tax losses of A Ltd can flow to the E group. When A Ltd moves into profit E Ltd sells shares in A Ltd to Z Ltd so that after the sale A Ltd is owned 74% by Z Ltd and 26% by E Ltd. If Z Ltd is a member of a loss making group 74% of the tax profits of A Ltd can be absorbed by group relief flowing from the Z group.

The legislation treats this fall in the shareholding of E Ltd in A Ltd as a 鈥榬elevant change in the relationship鈥� so that there is a qualifying change of ownership in relation to A Ltd.

There is a 鈥榬elevant change in the relationship鈥� whenever the 鈥榦wnership proportion鈥� is less at the end of the day than it was at the start of the day.

The ownership proportion is the lesser of:

• The percentage of the ordinary share capital of company A owned by company E;
• The percentage to which company E is beneficially entitled of any profits available for distribution to equity holders of Company A;
• The percentage to which company E would be beneficially entitled of any assets of Company A available for distribution to its equity holders on a winding up.