Taxes Consolidation Act 1997 section 417

Diminished share of profits or assets

Section 417 addresses situations where an equity holder's entitlement to a share of profits or assets on a winding up may change over time or as a result of arrangements, and ensures that the lowest applicable percentage is used when applying the 75% test for group relief.

• The section applies where an equity holder holds shares or securities whose profit or asset entitlement would differ if the relevant distribution or winding up occurred in a different accounting period — for example, where shares are set to lose dividend rights at a future date.
• Where the section applies, the profit and asset percentages are recalculated as if the rights applicable in that future period were already in force during the relevant accounting period.
• Where arrangements exist (whether in writing or not) that could alter an equity holder's share of profits or assets in any subsequent accounting period, those arrangements are assumed to take effect and the resulting variation is treated as arising from the nature of the rights attaching to the shares or securities.
• Where both section 416 (limitation of actual entitlement) and section 417 apply, both tests are applied separately in respect of the profit distribution and the notional winding up, and the lowest percentage produced by either test is the one used for the 75% group relief threshold.