Taxes Consolidation Act 1997 section 179

Conditions applicable where purchasing company is member of a group

Section 179 sets out the rules for determining whether a vendor's interest in a group of companies has been substantially reduced following a buyback of shares by a company within the group.

• A "group" means a parent company together with its 51% subsidiaries; the definition is extended to include unquoted companies that previously carried on the business of a group member, provided the transfer occurred within the preceding three years.
• When shares are bought back by a group company, the vendor's percentage interest across all "relevant companies" must fall to no more than 75% of the pre-buyback level for the reduction to be treated as substantial.
• A "relevant company" is the company making the purchase and any other group company in which the vendor (or associates) holds shares immediately before or after the buyback; the vendor's associates' interests are aggregated with the vendor's own interests.
• In addition to a substantial reduction in shareholding, there must also be a substantial reduction in the vendor's entitlement to the distributable profits of the group, again measured by the 75% threshold.