Finance Bill

House of Commons

Session 2004 - 05
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Finance Bill

Finance Bill
Part 7 — European company statute
122

(c)
the merging companies are not all resident in the same State,
(d)
in the course of the merger a company resident in the United
Kingdom (“company A”) transfers to a company resident in
another member State (“company B”) all assets and liabilities
relating to a business which company A carried on in a member
5
State other than the United Kingdom through a permanent
establishment, and
(e)
the aggregate of the chargeable gains accruing to company A on
the transfer exceeds the aggregate of any allowable losses so
accruing.
10
(2)
Where this section applies, for the purposes of this Act—
(a)
the allowable losses accruing to company A on the transfer shall
be set off against the chargeable gains so accruing, and
(b)
the transfer shall be treated as giving rise to a single chargeable
gain equal to the aggregate of those gains after deducting the
15
aggregate of those losses.
(3)
Where this section applies, section 815A of the Taxes Act shall also
apply.
(4)
Subsections (6) and (7) of section 140E apply for the purposes of this
section as they apply for the purposes of that section.
20
140G
Treatment of securities issued on merger
(1)
This section applies where—
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
25
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
(c)
the merging companies are not all resident in the same State,
and
(d)
the merger does not constitute or form part of a scheme of
30
reconstruction within the meaning of section 136.
(2)
Where this section applies, the merger shall be treated for the purposes
of section 136 as if it were a scheme of reconstruction.
(3)
Where section 136 applies by virtue of subsection (2) above section
136(6) (and section 137) shall not apply.
35
(4)
Subsections (6) and (7) of section 140E apply for the purposes of this
section as they apply for the purposes of that section.”
(2)
Subsection (1) shall have effect in relation to the formation of an SE which
occurs on or after 1st April 2005.
153
Intangible fixed assets
40
(1)
After paragraph 85 of Schedule 29 to FA 2002 (intangible fixed assets: gains and
losses: transfer of trade) insert—
“Formation of SE by merger
85A   (2)
This paragraph applies where—

Finance Bill
Part 7 — European company statute
123

(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
5
(c)
the merging companies are not all resident in the same State,
and
(d)
paragraph 84 above does not apply to any qualifying
transferred assets.
      (3)
Where this paragraph applies a transfer of qualifying transferred
10
assets is treated for the purposes of this Schedule as tax-neutral (see
paragraph 140).
      (4)
For the purposes of sub-paragraphs (1) and (2) an asset is a
qualifying transferred asset if—
(a)
it is transferred as part of the process of the merger,
15
(b)
it is a chargeable intangible asset in relation to the transferor
immediately before the transfer, and
(c)
it is a chargeable intangible asset in relation to the transferee
immediately after the transfer.
      (5)
Sub-paragraph (2) shall apply in relation to the formation of an SE by
20
merger only if—
(a)
it is effected for bona fide commercial reasons, and
(b)
it does not form part of a scheme or arrangements of which
the main purpose, or one of the main purposes, is avoiding
liability to corporation tax, capital gains tax or income tax.
25
      (6)
Paragraph 84(6) (and therefore paragraph 88) shall apply, with any
necessary modifications, in relation to sub-paragraph (4) above as in
relation to paragraph 84(5).
      (7)
For the purposes of this paragraph a company is resident in a
member State if—
30
(a)
it is within a charge to tax under the law of the State as being
resident for that purpose, and
(b)
it is not regarded for the purposes of any double taxation
relief arrangements to which the State is a party, as resident
in a territory not within a member State.”
35
(2)
Subsection (1) shall have effect in relation to the formation of an SE which
occurs on or after 1st April 2005.
154
Loan relationships
(1)
After paragraph 12A of Schedule 9 to FA 1996 (loan relationships: gains and
losses: continuity of treatment for groups) insert—
40
“Formation of SE by merger
12B   (1)
This paragraph applies where—
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council

Finance Bill
Part 7 — European company statute
124

Regulation (EC) 2157/2001 on the Statute for a European
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
(c)
the merging companies are not all resident in the same State,
and
5
(d)
either—
(i)
immediately after formation the SE is resident in the
United Kingdom and within the charge to
corporation tax in accordance with section 6 of the
Taxes Act, or
10
(ii)
immediately after formation the SE is not resident in
the United Kingdom but is within the charge to
corporation tax in accordance with section 11 of the
Taxes Act.
      (2)
Where this paragraph applies, the transfer in the course of the
15
merger of an asset or liability which represents a loan relationship
shall be disregarded except—
(a)
for the purpose of determining the debits or credits to be
brought into account in respect of exchange gains or losses
and identifying the company which is to bring them into
20
account, and
(b)
for the purpose of identifying the company in whose case a
debit or credit which does not relate to the transfer is to be
brought into account.
      (3)
Where this paragraph applies, the transferor and the transferee
25
companies of an asset or liability which represents a loan
relationship shall be deemed, except for the purposes specified in
sub-paragraph (2)(a) and (b), to be the same company.
      (4)
Paragraph 12(2A) shall have effect (with any necessary
modifications) in relation to this paragraph as in relation to
30
paragraph 12.
      (5)
Sub-paragraphs (2) and (3) shall apply in relation to the formation of
an SE by merger only if—
(a)
it is effected for bona fide commercial reasons, and
(b)
it does not form part of a scheme or arrangements of which
35
the main purpose, or one of the main purposes, is avoiding
liability to corporation tax, capital gains tax or income tax.
      (6)
But sub-paragraph (5) shall not have the effect of preventing sub-
paragraphs (2) and (3) from applying if before the merger the Inland
Revenue have on the application of the merging companies notified
40
them that the Inland Revenue are satisfied that sub-paragraph (5)
will not have that effect.
      (7)
For the purposes of this paragraph a company is resident in a
member State if—
(a)
it is within a charge to tax under the law of the State as being
45
resident for that purpose, and
(b)
it is not regarded for the purposes of any double taxation
relief arrangements to which the State is a party, as resident
in a territory not within a member State.”

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125

(2)
Subsection (1) shall have effect in relation to the formation of an SE which
occurs on or after 1st April 2005.
155
Derivative contracts
(1)
After paragraph 30A of Schedule 26 to FA 2002 (derivative contracts: profits:
groups) insert—
5
“Formation of SE by merger
30B   (1)
This paragraph applies where—
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
10
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
(c)
the merging companies are not all resident in the same State,
and
(d)
either—
15
(i)
immediately after formation the SE is resident in the
United Kingdom and within the charge to
corporation tax in accordance with section 6 of the
Taxes Act, or
(ii)
immediately after formation the SE is not resident in
20
the United Kingdom but is within the charge to
corporation tax in accordance with section 11 of the
Taxes Act.
      (2)
Where this paragraph applies, the transfer in the course of the
merger of rights or liabilities under a derivative contract shall be
25
disregarded except—
(a)
for the purpose of determining the debits or credits to be
brought into account in respect of exchange gains or losses
and identifying the company which is to bring them into
account, and
30
(b)
for the purpose of identifying the company in whose case a
debit or credit which does not relate to the transfer is to be
brought into account.
      (3)
Where this paragraph applies, the transferor and the transferee
companies of a right or liability under a derivative contract shall be
35
deemed, except for the purposes specified in sub-paragraph (3)(a)
and (b), to be the same company.
      (4)
Paragraph 30 shall apply, with any necessary modifications, in
relation to this paragraph as in relation to paragraph 28.
      (5)
Sub-paragraphs (2) and (3) shall apply in relation to a merger only
40
if—
(a)
it is effected for bona fide commercial reasons, and
(b)
it does not form part of a scheme or arrangements of which
the main purpose, or one of the main purposes, is avoiding
liability to corporation tax, capital gains tax or income tax.
45

Finance Bill
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126

      (6)
But sub-paragraph (5) shall not have the effect of preventing sub-
paragraphs (2) and (3) from applying if before the merger the Inland
Revenue have on the application of the merging companies notified
them that the Inland Revenue are satisfied that sub-paragraph (5)
will not have that effect.
5
      (7)
For the purposes of this paragraph a company is resident in a
member State if—
(a)
it is within a charge to tax under the law of the State as being
resident for that purpose, and
(b)
it is not regarded for the purposes of any double taxation
10
relief arrangements to which the State is a party, as resident
in a territory not within a member State.”
(2)
Subsection (1) shall have effect in relation to the formation of an SE which
occurs on or after 1st April 2005.
156
Capital allowances
15
(1)
After section 561 of CAA 2001 (transfer of UK trade to company in another
member State) insert—
“561A
     Transfer during formation of SE by merger
(1)
This section applies to the transfer of a qualifying asset as part of the
process of a merger to which section 140E of TCGA 1992 (formation of
20
SE by merger) applies.
(2)
Where this section applies to a transfer—
(a)
the transfer does not give rise to any allowance or charge under
this Act,
(b)
anything done to or by the transferor in relation to assets
25
transferred is to be treated after the transfer as having been
done to or by the transferee (with any necessary apportionment
of expenditure being made in a reasonable manner), and
(c)
section 343 of ICTA 1988 (company reconstruction without
change of ownership) shall not apply.
30
(3)
In subsection (1) “qualifying asset” has the same meaning as
“qualifying transferred asset” in section 140E of TCGA 1992.”
(2)
Subsection (1) shall have effect in relation to a transfer made on or after 1st
April 2005.
157
Stamp duty reserve tax
35
(1)
At the end of section 99(4) of FA 1986 (stamp duty reserve tax: interpretation:
chargeable securities) add—

                      “, or
(d)
they are issued or raised by an SE (whether or not in the course
of its formation in accordance with Article 2 of Council
40
Regulation (EC) 2157/2001 on the Statute for a European
Company (Societas Europaea)) and, at the time when it falls to
be determined whether the securities are chargeable securities,
the SE has its registered office in the United Kingdom.

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127

(4A)
“Chargeable securities” does not include securities falling within
paragraph (a), (b) or (c) of subsection (3) above if—
(a)
they are securities issued or raised by an SE (whether or not in
the course of its formation in accordance with Article 2 of
Council Regulation (EC) 2157/2001 on the Statute for a
5
European Company (Societas Europaea)), and
(b)
at the time when it falls to be determined whether the securities
are chargeable securities, the SE has its registered office outside
the United Kingdom;”
(2)
Subsection (1) shall have effect for the purposes of determining, in relation to
10
anything occurring on or after 1st April 2005, whether securities (whenever
issued or raised) are chargeable securities for the purposes of Part IV of FA
1986.
158
Bearer instruments: stamp duty and stamp duty reserve tax
(1)
In section 90(3C)(a) of FA 1986 (stamp duty reserve tax: bearer instruments)
15
after “United Kingdom” insert “(other than an SE which has transferred its
registered office out of the United Kingdom in accordance with Article 8 of
Council Regulation (EC) 2157/2001 on the Statute for a European Company
(Societas Europaea))”.
(2)
In section 90(3E)(a) of FA 1986 (stamp duty reserve tax: bearer instruments)
20
after “United Kingdom” insert “(other than an SE which has transferred its
registered office out of the United Kingdom in accordance with Article 8 of
Council Regulation (EC) 2157/2001 on the Statute for a European Company
(Societas Europaea))”.
(3)
In paragraph 11 of Schedule 15 to FA 1999 (bearer instruments) for the
25
definition of “UK company” substitute—
““UK company” means—
(a)
a company that is formed or established in the United
Kingdom (other than an SE which has transferred its
registered office out of the United Kingdom in
30
accordance with Article 8 of Council Regulation (EC)
2157/2001 on the Statute for a European Company
(Societas Europaea)), or
(b)
an SE which has its registered office in the United
Kingdom following a transfer in accordance with Article
35
8 of that Regulation; ”
(4)
This section shall have effect for the purposes of determining whether or not
stamp duty or stamp duty reserve tax is chargeable in respect of anything done
on or after 1st April 2005.
159
Consequential amendments
40
(1)
In section 815A(1) of ICTA (transfer of a non-UK trade) after “section 140C”
insert “or 140F”.
(2)
In section 35(3)(d)(i) of TCGA 1992 (re-basing to 1982, &c.) after “140A,” insert
“140E,”.
(3)
In section 140A of TCGA 1992 (transfer of UK trade)—
45

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128

(a)
in subsection (1)(b) for “securities” substitute “shares or debentures”,
and
(b)
in subsection (7) omit the definition of “securities”.
(4)
In section 140C of TCGA 1992 (transfer of non-UK trade)—
(a)
in subsection (1)(c) for “securities” substitute “shares or debentures”,
5
and
(b)
in subsection (9) omit the definition of “securities”.
(5)
In paragraph 88(1) and (5) of Schedule 29 to FA 2002 (intangible fixed assets:
gains and losses: transferred assets: application for clearance) after “85(5),”
insert “85A(5),”.
10
(6)
In paragraph 127 of that Schedule (acquired assets to be treated as existing
assets) after sub-paragraph (1)(b)(ii) insert—

                                         “, or

                                         (iii) section 140E of that Act (transfer on formation of
                                                 SE by merger),”.
15
(7)
Subsections (3) and (4) shall have effect in relation to an issue effected on or
after 1st April 2005.
160
Residence
(1)
After section 66 of FA 1988 (company residence) insert—
“66A
Residence of SE
20
(1)
This section applies to an SE which transfers its registered office to the
United Kingdom (in accordance with Article 8 of Council Regulation
(EC) 2157/2001 on the Statute for a European Company (Societas
Europaea)).
(2)
Upon registration in the United Kingdom the SE shall be regarded for
25
the purposes of the Taxes Acts as resident in the United Kingdom; and
accordingly, if a different place of residence is given by any rule of law,
that place shall not be taken into account for those purposes.
(3)
The SE shall not cease to be regarded as resident in the United Kingdom
by reason only of the subsequent transfer from the United Kingdom of
30
its registered office.
(4)
In this section “the Taxes Acts” has the same meaning as in the Taxes
Management Act 1970.”
(2)
In section 249(3) of FA 1994 (certain companies to be treated as non-resident)
after “resident there)” insert “, by virtue of section 66A of that Act (residence of
35
SE)”.
(3)
Subsection (1) shall have effect in relation to the transfer of a registered office
which occurs on or after 1st April 2005.
161
Continuity for transitional purposes
(1)
If at any time a company ceases to be resident in the United Kingdom in the
40
course of the formation of an SE by merger (whether or not the company
continues to exist after the formation of the SE) the provision specified in