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ICTA88/S254 (1), (2), (3) and (4) aim to prevent avoidance of the distributions legislation at ICTA88/S209 onwards. »Ê¹ÚÌåÓýapp avoidance targeted is where one company in a 90% group makes a distribution out of its assets in respect of shares or securities of another member of the same group. »Ê¹ÚÌåÓýapp company does this to avoid the payment or transfer of value being caught as a distribution under ICTA88/S209.

A principal company (that is, a company of which another company is a subsidiary) and all its 90% subsidiaries form a �90% group�. A �90% subsidiary� is defined in ICTA88/S838 (1)(c) as one in which 90% of the ordinary share capital (defined in ICTA88/S832 (1)) is directly owned by another body corporate.

ICTA88/S254 provides that, in relation to a company which is a member of a 90% group:

• ‘in respect of shares in a companyâ€� means in respect of shares of that company or any other company in the group (CTM15120),

and

• ‘in respect of securities of a companyâ€� means in respect of securities of that company or any other company in the group (CTM15130).

ICTA88/S254 also provides that, in relation to a company, which is a member of a 90% group, ‘distribution� includes anything distributed out of the assets of the company:

• in cash,
• or otherwise in respect of:
  • shares in another company in the group

or

• securities of another company in the group.

»Ê¹ÚÌåÓýapp parent of a 90% group may undertake to issue loan stock to the holders of preference shares in one of its subsidiaries in exchange for the cancellation of those preference shares. ICTA88/S209 (2)(c), (2)(d) and (2)(e) (CTM15450and CTM15500) apply if the loan stock is not issued wholly for new consideration.