MTT17040 - Scope: Determining ownership of entities: Calculating percentage direct and indirect ownership interests
Source: gov.uk (2025-08-05)


The rules on calculating percentage ownership interests are set out in Sections 246 and 248 of Finance (No.2) Act 2023.

Calculating direct ownership interests

The direct ownership interest an individual or entity (“A”) holds in an entity (“B”) is the average proportional entitlement of A to the following types of interest that are relevant:
- an interest giving rise to a share of B’s profits.
- an interest giving rise to a share of B’s capital.
- an interest giving rise to a share of B’s reserves.
All types of interest will be “relevant” unless the provision in question specifies that only some of the types are relevant.

Example

A Ltd holds an interest in B Ltd that entitles it to 30% of the profits of B Ltd, but none of the capital or reserves.

The provision does not specify which types of interest are relevant, so all three types are relevant.

The average proportional entitlement of A Ltd across the relevant types of interest is 10% (30%+0%+0%/3).

A Ltd has a 10% direct ownership interest in B Ltd for the purpose of the provision.

Calculating indirect ownership interests

Indirect ownership interests are calculated in the same way as for many other tests of this type.

To find the indirect ownership interest for each entity, determine the direct ownership interests held by each entity in the chain of entities (using the averaging process above in each case) and multiply these percentages for each entity up the chain in turn.

If an entity has indirect ownership interests in another entity via multiple ownership chains, its total indirect ownership interest will be the aggregate of these interests.

Exclusion of indirect interest held through ultimate parent

When determining whether an individual or entity has an indirect ownership interest in a member (other than the ultimate parent) of a group, any interests arising solely as a result of an ownership interest in the ultimate parent should be ignored.

This is required because in some cases it is necessary to test the ownership interest held in an entity by persons who are not member of the group (for example, when determining whether an entity is a partially owned parent – see MTT61030 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt61030)). The ownership interest includes direct and indirect interests, so if indirect interests held through the ultimate parent were not excluded, even a wholly-owned subsidiary of the ultimate parent would be considered to have ownership interests held outside of the group.

Example

A Ltd is the ultimate parent of a group. It has two wholly-owned subsidiaries, A1 Ltd and A2 Ltd. No other individual or entity is entitled to the profits, capital or reserves of these subsidiaries.

A1 Ltd has a 40% direct ownership interest in B Ltd.

A2 Ltd has a 20% direct ownership interest in B Ltd.

A Ltd has an indirect interest of 60% in B Ltd, which is the aggregate of the (100% * 40% =) 40% indirect interest held through A1 Ltd, and the (100% * 20% =) 20% indirect interest held through A2 Ltd.

Z Ltd has a 1% direct interest in A Ltd. It does not hold any direct interest in any other entity.

Z Ltd does not have an indirect interest in the subsidiaries of A Ltd for MTT purposes, because its interest is held through the ultimate parent of a group.