Introduction Background Note
6.Changes to Chapters 3 and 4 of Part 9 of CTA 2010 (formerly Schedule 10 to FA 2006) will ensure that legislation dealing with a lessor company owned by a consortium will trigger the appropriate charge and relief.
7.Schedule 10 was introduced in response to a well-established pattern of avoidance involving the sale of a lessor company to a loss-making concern as it was about to turn tax profitable. The effect of the legislation is triggered when there is a change in the ownership of the lessor company. When the lessor company is owned by a consortium, a change in a member’s interest in the lessor company triggers a proportionate charge.
8.Schedule 10 defines "a company owned by a consortium" in line with definitions used for the purpose of group relief. The group relief provisions permit members of a consortium to access group relief from a trading company owned directly by the members and where shares in the trading company are held by a holding company that is owned by the members of the consortium. The group relief provisions do not permit access to group relief when the trading company is owned indirectly by a holding company that is owned by the consortium members. Schedule 10 copies this approach and it is therefore possible to prevent a company from being treated as “a company owned by a consortium” for the purposes of Schedule 10 by inserting an intermediate holding company between the lessor company and the company owned by the consortium.
9.The insertion of the intermediate holding company does not trigger a Schedule 10 charge because there is no change of economic ownership, but, as a consequence of the restructuring the lessor company is taken outside the definition of a company owned by a consortium. A subsequent change in ownership would fail to trigger a Schedule 10 charge.
10.This section changes the way the definition of a company owned by a consortium operates to include a company that is a direct or indirect 75 per cent subsidiary of a company owned by a consortium. As a consequence, a Schedule 10 charge will be triggered when there is a change in the economic ownership of a lessor company owned by a consortium.