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(5) For this purpose a company is “above” the vendor in the group structure if | |
the vendor, or another company that is above the vendor in the group | |
structure, is a 75% subsidiary of the company. | |
(6) The third case is where— | |
(a) the purchaser ceases to be a member of the same group as the vendor | 5 |
as a result of an acquisition of shares by another company (“the | |
acquiring company”) in relation to which— | |
(i) section 75 of the Finance Act 1986 (c. 41) applies (stamp duty: | |
acquisition relief), and | |
(ii) the conditions for relief under that section are met, | 10 |
and | |
(b) the purchaser is immediately after that acquisition a member of the | |
same group as the acquiring company. | |
(7) But if in a case within sub-paragraph (6)— | |
(a) the purchaser ceases to be a member of the same group as the | 15 |
acquiring company— | |
(i) before the end of the period of three years beginning with the | |
effective date of the relevant transaction, or | |
(ii) in pursuance of, or in connection with, arrangements made | |
before the end of that period, | 20 |
and | |
(b) at the time the purchaser ceases to be a member of the same group as | |
the acquiring company, it or a relevant associated company holds a | |
chargeable interest— | |
(i) that was acquired by the purchaser under the relevant | 25 |
transaction, or | |
(ii) that is derived from an interest so acquired, | |
and that has not subsequently been acquired at market value under | |
a chargeable transaction for which group relief was available but was | |
not claimed, | 30 |
the provisions of this Part relating to group relief apply as if the purchaser | |
had then ceased to be a member of the same group as the vendor. | |
(8) In sub-paragraph (7)— | |
“arrangements” includes any scheme, agreement or understanding, | |
whether or not legally enforceable; and | 35 |
“relevant associated company”, in relation to the purchaser, means a | |
company that is a member of the same group as the purchaser that | |
ceases to be a member of the same group as the acquiring company | |
in consequence of the purchaser so ceasing. | |
Recovery of group relief from another group company or controlling director | 40 |
5 (1) This paragraph applies where— | |
(a) tax is chargeable under paragraph 3 (withdrawal of group relief), | |
(b) the amount so chargeable has been finally determined, and | |
(c) the whole or part of the amount so chargeable is unpaid six months | |
after the date on which it became payable. | 45 |
(2) The following persons may, by notice under paragraph 6, be required to pay | |
the unpaid tax— | |
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(a) the vendor; | |
(b) any company that at any relevant time was a member of the same | |
group as the purchaser and was above it in the group structure; | |
(c) any person who at any relevant time was a controlling director of the | |
purchaser or a company having control of the purchaser. | 5 |
(3) For the purposes of sub-paragraph (2)(b)— | |
(a) a “relevant time” means any time between the effective date of the | |
relevant transaction and the purchaser ceasing to be a member of the | |
same group as the vendor; and | |
(b) a company (“company A”) is “above” another company (“company | 10 |
B”) in a group structure if company B, or another company that is | |
above company B in the group structure, is a 75% subsidiary of | |
company A. | |
(4) In sub-paragraph (2)(c)— | |
“director”, in relation to a company, has the meaning given by section | 15 |
67(1) of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) | |
(read with subsection (2) of that section) and includes any person | |
falling within section 417(5) of the Taxes Act 1988 (read with | |
subsection (6) of that section); and | |
“controlling director”, in relation to a company, means a director of | 20 |
the company who has control of it (construing control in | |
accordance with section 416 of the Taxes Act 1988). | |
Recovery of group relief: supplementary | |
6 (1) The Inland Revenue may serve a notice on a person within paragraph 5(2) | |
above requiring him within 30 days of the service of the notice to pay the | 25 |
amount that remains unpaid. | |
(2) Any such notice must be served before the end of the period of three years | |
beginning with the date of the final determination mentioned in paragraph | |
5(1)(b). | |
(3) The notice must state the amount required to be paid by the person on whom | 30 |
the notice is served. | |
(4) The notice has effect— | |
(a) for the purposes of the recovery from that person of the amount | |
required to be paid and of interest on that amount, and | |
(b) for the purposes of appeals, | 35 |
as if it were a notice of assessment and that amount were an amount of tax | |
due from that person. | |
(5) A person who has paid an amount in pursuance of a notice under this | |
paragraph may recover that amount from the purchaser. | |
(6) A payment in pursuance of a notice under this paragraph is not allowed as | 40 |
a deduction in computing any income, profits or losses for any tax purpose. | |
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Part 2 | |
Reconstruction and acquisition reliefs | |
Reconstruction relief | |
7 (1) Where— | |
(a) a company (“the acquiring company”) acquires the whole or part of | 5 |
the undertaking of another company (“the target company”) in | |
pursuance of a scheme for the reconstruction of the target company, | |
and | |
(b) the first, second and third conditions specified below are met, | |
a land transaction entered into for the purposes of or in connection with the | 10 |
transfer of the undertaking or part is exempt from charge. | |
Relief under this paragraph is referred to in this Part as “reconstruction | |
relief”. | |
(2) The first condition is that the consideration for the acquisition consists | |
wholly or partly of the issue of non-redeemable shares in the acquiring | 15 |
company to— | |
(a) the target company, or | |
(b) all or any of the target company’s shareholders. | |
“Non-redeemable shares” means shares that are not redeemable shares. | |
(3) Where the consideration for the acquisition consists partly of the issue of | 20 |
non-redeemable shares as mentioned in the first condition, that condition is | |
met only if the rest of the consideration consists wholly of the assumption or | |
discharge by the acquiring company of liabilities of the target company. | |
(4) The second condition is that after the acquisition has been made— | |
(a) each shareholder of each of the companies is a shareholder of the | 25 |
other, and | |
(b) the proportion of shares of one of the companies held by any | |
shareholder is the same, or as nearly as may be the same, as the | |
proportion of shares of the other company held by that shareholder. | |
(5) The third condition is that the acquisition is effected for bona fide | 30 |
commercial reasons and does not form part of a scheme or arrangement of | |
which the main purpose, or one of the main purposes, is the avoidance of | |
liability to tax. | |
“Tax” here means stamp duty, income tax, corporation tax, capital gains tax | |
or tax under this Part. | 35 |
(6) This paragraph is subject to paragraph 9 (withdrawal of reconstruction or | |
acquisition relief). | |
Acquisition relief | |
8 (1) Where— | |
(a) a company (“the acquiring company”) acquires the whole or part of | 40 |
the undertaking of another company (“the target company”), and | |
(b) the first and second conditions specified below are met, | |
the rate of tax chargeable on a land transaction entered into for the purposes | |
of or in connection with the transfer of the undertaking or part is limited to | |
0.5%. | 45 |
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Relief under this paragraph is referred to in this Part as “acquisition relief”. | |
(2) The first condition is that the consideration for the acquisition consists | |
wholly or partly of the issue of non-redeemable shares in the acquiring | |
company to— | |
(a) the target company, or | 5 |
(b) all or any of the target company’s shareholders. | |
“Non-redeemable shares” means shares that are not redeemable shares. | |
(3) Where the consideration for the acquisition consists partly of the issue of | |
non-redeemable shares as mentioned in the first condition, that condition is | |
met only if the rest of the consideration consists wholly of— | 10 |
(a) cash not exceeding 10% of the nominal value of the non-redeemable | |
shares so issued, or | |
(b) the assumption or discharge by the acquiring company of liabilities | |
of the target company, or | |
(c) both of those things. | 15 |
(4) The second condition is that the acquiring company is not associated with | |
another company that is a party to arrangements with the target company | |
relating to shares of the acquiring company issued in connection with the | |
transfer of the undertaking or part. | |
(5) For this purpose— | 20 |
(a) companies are associated if one has control of the other or both are | |
controlled by the same person or persons, and | |
(b) “arrangements” includes any scheme, agreement or understanding, | |
whether or not legally enforceable. | |
The reference in paragraph (a) to control shall be construed in accordance | 25 |
with section 416 of the Taxes Act 1988. | |
(6) This paragraph is subject to paragraph 9 (withdrawal of reconstruction or | |
acquisition relief). | |
Withdrawal of reconstruction or acquisition relief | |
9 (1) Where in the case of a transaction (“the relevant transaction”) that is exempt | 30 |
by virtue of reconstruction relief or is subject to a reduced rate of tax by | |
virtue of acquisition relief— | |
(a) control of the acquiring company changes— | |
(i) before the end of the period of three years beginning with the | |
effective date of the transaction, or | 35 |
(ii) in pursuance of, or in connection with, arrangements made | |
before the end of that period, | |
and | |
(b) at the time control of the acquiring company changes (“the relevant | |
time”), it or a relevant associated company holds a chargeable | 40 |
interest— | |
(i) that was acquired by the acquiring company under the | |
relevant transaction, or | |
(ii) that is derived from an interest so acquired, | |
and that has not subsequently been acquired at market value under | 45 |
a chargeable transaction in relation to which reconstruction or | |
acquisition relief was available but was not claimed, | |
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reconstruction or acquisition relief in relation to the relevant transaction, or | |
an appropriate proportion of it, is withdrawn and tax is chargeable in | |
accordance with this paragraph. | |
(2) The amount chargeable is the tax that would have been chargeable in respect | |
of the relevant transaction but for reconstruction or acquisition relief if the | 5 |
chargeable consideration for that transaction had been an amount equal to | |
the market value of the subject matter of the transaction or, as the case may | |
be, an appropriate proportion of the tax that would have been so chargeable. | |
(3) In sub-paragraphs (1) and (2) “an appropriate proportion” means an | |
appropriate proportion having regard to the subject-matter of the relevant | 10 |
transaction and what is held at the relevant time by the acquiring company | |
or, as the case may be, by that company and any relevant associated | |
companies. | |
(4) In this paragraph “relevant associated company”, in relation to the acquiring | |
company, means a company— | 15 |
(a) that is controlled by the acquiring company immediately before the | |
control of that company changes, and | |
(b) of which control changes in consequence of the change of control of | |
that company. | |
(5) In this paragraph— | 20 |
(a) “arrangements” includes any scheme, agreement or understanding, | |
whether or not legally enforceable; | |
(b) “control” shall be construed in accordance with section 416 of the | |
Taxes Act 1988; and | |
(c) references to control of a company changing are to the company | 25 |
becoming controlled— | |
(i) by a different person, | |
(ii) by a different number of persons, or | |
(iii) by two or more persons at least one of whom is not the | |
person, or one of the persons, by whom the company was | 30 |
previously controlled. | |
(6) This paragraph has effect subject to paragraph 10 (cases in which | |
reconstruction or acquisition relief not withdrawn). | |
Cases in which reconstruction or acquisition relief not withdrawn | |
10 (1) Reconstruction or acquisition relief is not withdrawn under paragraph 9 in | 35 |
the following cases. | |
(2) The first case is where control of the acquiring company changes as a result | |
of a share transaction that is effected as mentioned in any of paragraphs (a) | |
to (d) of paragraph 3 of Schedule 3 (transactions in connection with divorce | |
etc). | 40 |
(3) The second case is where control of the acquiring company changes as a | |
result of a share transaction that— | |
(a) is effected as mentioned in paragraph 4(1) of Schedule 3, and | |
(b) meets the conditions in paragraph 4(2) of that Schedule (variation of | |
testamentary dispositions etc). | 45 |
(4) The third case is where control of the acquiring company changes as a result | |
of an exempt intra-group transfer. | |
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An “exempt intra-group transfer” means a transfer of shares effected by an | |
instrument that is exempt from stamp duty by virtue of section 42 of the | |
Finance Act 1930 (c. 28) or section 11 of the Finance Act (Northern Ireland) | |
1954 (c. 23 (N. I.)) (transfers between associated bodies corporate). | |
But see paragraph 11 (withdrawal of relief in case of subsequent non-exempt | 5 |
transfer). | |
(5) The fourth case is where control of the acquiring company changes as a | |
result of a transfer of shares to another company in relation to which share | |
acquisition relief applies. | |
“Share acquisition relief” means relief under section 77 of the Finance Act | 10 |
1986 (c. 41) and a transfer is one in relation to which that relief applies if an | |
instrument effecting the transfer is exempt from stamp duty by virtue of that | |
provision. | |
But see paragraph 11 (withdrawal in case of subsequent non-exempt | |
transfer). | 15 |
(6) The fifth case is where— | |
(a) control of the acquiring company changes as a result of a loan | |
creditor becoming, or ceasing to be, treated as having control of the | |
company, and | |
(b) the other persons who were previously treated as controlling the | 20 |
company continue to be so treated. | |
“Loan creditor” here has the meaning given by section 417(7) to (9) of the | |
Taxes Act 1988. | |
Withdrawal of reconstruction or acquisition relief on subsequent non-exempt transfer | |
11 (1) Where paragraph 10(4) (change of control of acquiring company as a result | 25 |
of exempt intra-group transfer) has effect to prevent the withdrawal of | |
reconstruction or acquisition relief on a change of control of the acquiring | |
company, but— | |
(a) a company holding shares in the acquiring company to which the | |
exempt intra-group transfer related, or that are derived from shares | 30 |
to which that transfer related, ceases to be a member of the same | |
group as the target company— | |
(i) before the end of the period of three years beginning with the | |
effective date of the relevant transaction, or | |
(ii) in pursuance of or in connection with arrangements made | 35 |
before the end of that period, | |
and | |
(b) the acquiring company or a relevant associated company, at that | |
time (“the relevant time”), holds a chargeable interest— | |
(i) that was transferred to the acquiring company by the | 40 |
relevant transaction, or | |
(ii) that is derived from an interest that was so transferred, | |
and that has not subsequently been transferred at market value by a | |
chargeable transaction in relation to which reconstruction or | |
acquisition relief was available but was not claimed, | 45 |
reconstruction or acquisition relief in relation to the relevant transaction, or | |
an appropriate proportion of it, is withdrawn and tax is chargeable in | |
accordance with this paragraph. | |
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(2) Where paragraph 10(5) (change of control of acquiring company as a result | |
of a transfer to which share acquisition relief applies) has effect to prevent | |
the withdrawal of reconstruction or acquisition relief on a change of control | |
of the acquiring company, but— | |
(a) control of the other company mentioned in that provision changes— | 5 |
(i) before the end of the period of three years beginning with the | |
effective date of the relevant transaction, or | |
(ii) in pursuance of or in connection with arrangements made | |
before the end of that period, | |
at a time when that company holds any shares transferred to it by the | 10 |
exempt transfer, or any shares derived from shares so transferred, | |
and | |
(b) the acquiring company or a relevant associated company, at that | |
time (“the relevant time”), holds a chargeable interest— | |
(i) that was transferred to the acquiring company by the | 15 |
relevant transaction, or | |
(ii) that is derived from an interest that was so transferred, | |
and that has not subsequently been transferred at market value by a | |
chargeable transaction in relation to which reconstruction or | |
acquisition relief was available but was not claimed, | 20 |
reconstruction or acquisition relief in relation to the relevant transaction, or | |
an appropriate proportion of it, is withdrawn and tax is chargeable in | |
accordance with this paragraph. | |
(3) The amount chargeable is the tax that would have been chargeable in respect | |
of the relevant transaction but for reconstruction or acquisition relief if the | 25 |
chargeable consideration for that transaction had been an amount equal to | |
the market value of the subject matter of the transaction or, as the case may | |
be, an appropriate proportion of the tax that would have been so chargeable. | |
(4) In sub-paragraphs (1), (2) and (3) “an appropriate proportion” means an | |
appropriate proportion having regard to the subject-matter of the relevant | 30 |
transaction and what is held at the relevant time by the acquiring company | |
or, as the case may be, by that company and any relevant associated | |
companies. | |
(5) In this paragraph “relevant associated company”, in relation to the acquiring | |
company, means a company— | 35 |
(a) that is controlled by the acquiring company immediately before the | |
control of that company changes, and | |
(b) of which control changes in consequence of the change of control of | |
that company. | |
(6) In this paragraph— | 40 |
(a) “arrangements” includes any scheme, agreement or understanding, | |
whether or not legally enforceable; | |
(b) “control” shall be construed in accordance with section 416 of the | |
Taxes Act 1988; and | |
(c) references to control of a company changing are to the company | 45 |
becoming controlled— | |
(i) by a different person, | |
(ii) by a different number of persons, or | |
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