INTM205150 - Controlled Foreign Companies: exemptions - Exempt Activities Test ('EAT')
Definition of a superior holding company
ICTA88/SCH25/PARA6(6), and PARA12A(1)-(3)
A controlled foreign company will be treated as a superior holding company for the purposes of the exempt activities test if it is
- a company the business of which consists wholly or mainly in
the holding of shares or securities of companies (or a company)
which are
i) holding companies or local holding companies, or
ii) themselves superior holding companies, or
- a company which would fall within (a) above if there were
disregarded so much of its business as consists in the holding of
property or rights of any description, for use wholly or mainly by
companies which it controls and which are resident in the territory
in which it is resident.
A company may engage in activities other than the holding of
shares or securities in the types of company specified above,
provided that its business consists mainly in the holding of such
shares or securities (or would so consist if the part of its
business relating to the holding of property etc for use by its
subsidiaries resident in its own territory of residence were
disregarded). So, for example, the existence of some trading
activity, shareholdings not of the type specified, (for example, in
associated companies or dormant subsidiaries) or portfolio
investments will not prevent the company from qualifying as a
holding company, provided that its business consists wholly or
mainly in the holding of shares or securities in the types of
company specified above. ‘Wholly or mainly’ means more
than 50% of the business.
It is recognised that there may be occasions where
information about the Controlled Foreign Company may not be
available or the time it would take to verify beyond any doubt that
the Controlled Foreign Company satisfies all of the conditions for
the exemption would be disproportionate. In these circumstances see
INTM214020 for further guidance.
