Section 242 Ownership interests and controlling interests

United Kingdom

(1)

In this Part “ownership interest” means a direct ownership interest or an indirect ownership interest.

(2)

An entity or an individual (“A”) has a direct ownership interest in an entity (“B”) if—

(a)

A has an interest (whether by way of shares, other security or otherwise) that gives rise to a share of the profits, capital or reserves of B or of a permanent establishment of B (whether on the making of a distribution of profits, winding up or otherwise), and

F1(b)

that interest is accounted for as equity in—

(i)

where B is a member of a consolidated group, the consolidated financial statements of the ultimate parent of the group (ignoring any requirement to consolidate the assets, liabilities, income, expenses and cash flows of B in those statements), or

(ii)

otherwise, B’s financial statements.

(3)

An entity or an individual (“C”) has an indirect ownership interest in an entity (“D”) if C has a direct ownership interest in—

(a)

an entity that has a direct ownership interest in D, or

(b)

an entity that has (as a result of the single or repeated application of this subsection) an indirect ownership interest in D.

(4)

An entity (“R”) has a controlling interest in another entity (“S”) if condition A or B is met.

(5)

Condition A is that as a result of an ownership interest R has in S—

(a)

R is required to consolidate the assets, liabilities, income, expenses and cash flows of S on a line-by-line basis in accordance with an acceptable F2... accounting standard, or

(b)

R would have been required to do so if R had prepared consolidated financial statements.

(6)

Condition B is that S is a permanent establishment of R.

Annotations

Textual amendments

F1: S. 242(2)(b) substituted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 33, 53(5)-(13)
F2: Word in s. 242(5)(a) omitted (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by virtue of Finance Act 2025 (c. 8), Sch. 4 paras. 68, 72(4)

Notes on Part 3

Modifications

C1: Pt. 3 modified (2.12.2025) by Finance Act 2026 (c. 11), Sch. 8 paras. 32, 53(3)