|
| |
|
(5) | In subsection (4) “the relevant period” means the period between— |
| |
(a) | the transfer of the relevant asset to the transferee, and |
| |
(b) | the transferee ceasing to meet the qualifying condition. |
| |
(6) | This section is subject to section 789 (merger carried out for genuine |
| |
| 5 |
(7) | References in this section to “the transferee” and the relevant asset” must be |
| |
read in accordance with section 780. |
| |
(8) | For the way in which Chapter 7 applies if a company is treated as having |
| |
realised an asset as a result of this section, see section 791 (application of roll- |
| |
over relief in relation to degrouping charge). |
| 10 |
786 | Character of credits and debits brought into account as a result of section 785 |
| |
(1) | For the purposes of Chapter 6 (how credits and debits are given effect) credits |
| |
or debits brought into account because of section 785 take their character from |
| |
the purposes for which the relevant asset was held by the transferee |
| |
immediately after the transfer. |
| 15 |
(2) | But subsection (1) does not apply if conditions A and B are met. |
| |
(3) | Condition A is that immediately after the transfer the asset was held by the |
| |
transferee for the purposes of a trade, business or concern within section 747, |
| |
| |
(4) | Condition B is that the transferee ceased to carry on that trade, business or |
| 20 |
concern before it ceased to meet the qualifying condition. |
| |
(5) | If conditions A and B are met, a credit or debit brought into account because of |
| |
section 785 is treated for the purposes of Chapter 6 as a non-trading credit or |
| |
| |
(6) | References in this section to “the transferee” and the relevant asset” must be |
| 25 |
read in accordance with section 780. |
| |
787 | Company ceasing to be member of group because of exempt distribution |
| |
(1) | Sections 780 and 785 do not apply if a company ceases to be a member of a |
| |
group just because of an exempt distribution, unless subsection (2) applies. |
| |
(2) | This subsection applies if there is a chargeable payment within 5 years after the |
| 30 |
making of the exempt distribution. |
| |
(3) | If subsection (2) applies, all such adjustments as may be required, by way of |
| |
assessment, amendment of returns or otherwise, may be made within the |
| |
period of 3 years after the making of the chargeable payment. |
| |
(4) | Those adjustments may be made despite any time limit on the making of an |
| 35 |
assessment or the amendment of a return. |
| |
| |
“exempt distribution” means a distribution that is exempt because of |
| |
section 213(2) of ICTA (distributions involving shares in 75% |
| |
| 40 |
“chargeable payment” has the meaning given in section 214(2) of that Act. |
| |
|
| |
|
| |
|
(6) | Subsections (7) and (8) apply for determining for the purposes of this section |
| |
whether one company is a 75% subsidiary of another company. |
| |
(7) | The other company is treated as not being the owner of any share capital that |
| |
it owns directly in a body corporate if a profit on a sale of the shares would be |
| |
treated as a trading receipt of its trade. |
| 5 |
(8) | The other company is treated as not being the owner of any share capital that— |
| |
(a) | it owns indirectly, and |
| |
(b) | is owned directly by a body corporate for which a profit on the sale of |
| |
the shares would be a trading receipt. |
| |
788 | Provisions supplementing sections 780 to 787 |
| 10 |
(1) | References in sections 780 to 787 (degrouping) to a company ceasing to be a |
| |
member of a group do not include cases where a company ceases to be a |
| |
member of a group in consequence of another member of the group ceasing to |
| |
| |
(2) | For the purposes of those sections an asset acquired by a company is treated as |
| 15 |
the same as an asset owned at a later time by that company or an associated |
| |
company if the value of the second asset is derived in whole or in part from the |
| |
| |
(3) | For the purposes of those sections and this section two or more companies are |
| |
associated if, by themselves, they would form a group of companies. |
| 20 |
789 | Merger carried out for genuine commercial reasons |
| |
(1) | Sections 780 to 787 do not apply if— |
| |
(a) | the transferee ceases to be a member of a group of companies (“the |
| |
group”) as part of a merger, |
| |
(b) | the merger is carried out for genuine commercial reasons, and |
| 25 |
(c) | the avoidance of liability to tax is not the main purpose of the merger |
| |
or one of its main purposes. |
| |
(2) | For this purpose “merger” means an arrangement in respect of which each of |
| |
conditions A to D is met. |
| |
| 30 |
(a) | as a result of the arrangement one or more companies (“the acquiring |
| |
company” or “the acquiring companies”) acquire one or more interests |
| |
in the whole or part of the business which, before the arrangement took |
| |
effect, was carried on by the transferee, |
| |
(b) | the acquiring company is not a member of the group or, as the case may |
| 35 |
be, none of the acquiring companies is such a member, |
| |
(c) | at least 25% by value of each of the interests acquired consists of a |
| |
holding of ordinary share capital, and |
| |
(d) | the acquisition is not with a view to the disposal of the interests. |
| |
| 40 |
(a) | as a result of the arrangement one or more members of the group |
| |
acquire one or more interests in the whole or part of the business or |
| |
each of the businesses which, before the arrangement took effect, was |
| |
| |
|
| |
|
| |
|
(i) | by the acquiring company or acquiring companies, or |
| |
(ii) | by a company at least 90% of whose ordinary share capital was |
| |
then beneficially owned by two or more of the acquiring |
| |
| |
(b) | at least 25% by value of each of the interests acquired consists of a |
| 5 |
holding of ordinary share capital, |
| |
(c) | the remainder of the interest, or as the case may be of each of the |
| |
interests, acquired consists of a holding of share capital (of any |
| |
description) or debentures or both, and |
| |
(d) | the acquisition is not with a view to the disposal of the interests. |
| 10 |
(5) | Condition C is that the value or, as the case may be, the total value of the |
| |
interest or interests acquired as mentioned in subsection (3) is substantially the |
| |
same as the value or, as the case may be, the total value of the interest or |
| |
interests acquired as mentioned in subsection (4). |
| |
(6) | Condition D is that the consideration for the acquisition of the interest or |
| 15 |
interests acquired by the acquiring company or acquiring companies as |
| |
mentioned in subsection (3)— |
| |
(a) | consists of, or is applied in the acquisition of, the interest or interests |
| |
acquired by members of the group as mentioned in subsection (4), or |
| |
(b) | consists partly of, and as to the balance is applied in the acquisition of, |
| 20 |
that interest or those interests. |
| |
(7) | Section 790 supplements this section. |
| |
790 | Provisions supplementing section 789 |
| |
(1) | In section 789 “arrangement” includes a series of arrangements. |
| |
(2) | For the purposes of section 789(3) and (4) a member of a group of companies is |
| 25 |
treated as carrying on as one business the activities of that group. |
| |
(3) | For the purposes of section 789(3)(c), (4)(b) and (5) the value of an interest is |
| |
determined as at the date of its acquisition. |
| |
(4) | For the purposes of section 789(6), any part of the consideration for the |
| |
acquisition which is small by comparison with the total is ignored. |
| 30 |
791 | Application of roll-over relief in relation to degrouping charge |
| |
(1) | Chapter 7 (roll-over relief in case of realisation and reinvestment) applies with |
| |
the modifications specified in subsections (2) to (4) if a company is treated as |
| |
having realised an asset as a result of section 780 or 785 (degrouping). |
| |
(2) | In section 755 (conditions relating to the old asset), for the references to the old |
| 35 |
asset being a chargeable intangible asset in relation to the company substitute |
| |
references to its being a chargeable intangible asset in relation to the transferor. |
| |
(3) | In section 756(1) (conditions relating to expenditure on other assets), for the |
| |
references to the date of realisation of the old asset substitute— |
| |
(a) | in a case within section 780, references to the date on which the |
| 40 |
transferee ceased to be a member of the group, and |
| |
(b) | in a case within section 785, references to the date on which the |
| |
transferee ceased to meet the qualifying condition. |
| |
|
| |
|
| |
|
(4) | For references in Chapter 7 to the proceeds of realisation substitute references |
| |
to the amount for which the transferee is treated as having realised the asset. |
| |
(5) | A reduction of that amount as a result of a claim for relief under Chapter 7 does |
| |
not affect the value at which the company is treated as having reacquired the |
| |
| 5 |
(6) | In this section “the transferee” and “the transferor” have the same meaning as |
| |
| |
Reallocation of degrouping charge within group and recovery |
| |
792 | Reallocation of charge within group |
| |
(1) | This section applies if a chargeable realisation gain (see section 741) accrues to |
| 10 |
a company (“A”) under section 780 or 785 in respect of an asset. |
| |
(2) | A and a company (“B”) that was a member of the relevant group at the relevant |
| |
time may jointly elect that the gain, or such part of it as may be specified in the |
| |
election, must be treated as accruing to B, and not A. |
| |
(3) | In a case within section 780— |
| 15 |
(a) | “the relevant group” is the group of which A was a member at the |
| |
| |
(b) | “the relevant time” is immediately before A ceases to be a member of |
| |
| |
(4) | In a case within section 785— |
| 20 |
(a) | “the relevant group” is the second group (within the meaning of that |
| |
| |
(b) | “the relevant time” is immediately before A ceases to meet the |
| |
qualifying condition (within the meaning of that section). |
| |
(5) | The effect of the election is that the gain, or the part specified in the election, is |
| 25 |
| |
(a) | as if it had accrued to B at the relevant time as a non-trading credit for |
| |
the purposes of Chapter 6 (how credits and debits are given effect), and |
| |
(b) | if B is not UK resident at the relevant time, as if it had accrued in respect |
| |
of an asset held for the purposes of a permanent establishment of B in |
| 30 |
| |
(6) | Section 793 makes further provision about elections under this section. |
| |
(7) | Section 794 makes provision for enabling claims under Chapter 7 to be made |
| |
| |
(8) | In sections 793 and 794 references to “A” and “B” and “the relevant time” must |
| 35 |
be read in accordance with this section. |
| |
793 | Further requirements about elections under section 792 |
| |
(1) | An election under section 792 may be made only if subsection (2) or (3) applies |
| |
| |
(2) | This subsection applies if at the relevant time B was UK resident. |
| 40 |
(3) | This subsection applies if at the relevant time— |
| |
|
| |
|
| |
|
(a) | B carried on a trade in the United Kingdom through a permanent |
| |
| |
(b) | B was not exempt from corporation tax in respect of the income or |
| |
chargeable gains of that permanent establishment because of |
| |
arrangements under Part 18 of ICTA (double taxation relief). |
| 5 |
(4) | An election under section 792 may not be made if at the relevant time B was— |
| |
(a) | a qualifying society within the meaning of section 461A of ICTA |
| |
(incorporated friendly societies entitled to exemption from tax), or |
| |
(b) | a dual resident investing company within the meaning of section 404 of |
| |
that Act (limitation of group relief). |
| 10 |
(5) | An election under section 792 may only be made— |
| |
(a) | by notice in writing to an officer of Revenue and Customs, and |
| |
(b) | not later than 2 years after the end of the accounting period of A in |
| |
which the relevant time falls. |
| |
794 | Application of roll-over relief in relation to reallocated charge |
| 15 |
(1) | This section applies where an election has been made under section 792 for the |
| |
purpose of enabling B to make a claim under Chapter 7 (roll-over relief on |
| |
realisation and reinvestment). |
| |
(2) | Chapter 7 applies as if the realisation of the asset treated as occurring under |
| |
section 780 or 785 had been by B, and not A. |
| 20 |
(3) | The conditions in section 755 (conditions relating to the old asset) are treated |
| |
as met in relation to the asset if they would have been met if there had been no |
| |
election and A had made the claim. |
| |
(4) | The proceeds of realisation and the cost of the old asset recognised for tax |
| |
purposes are what they would have been if there had been no election and A |
| 25 |
| |
(5) | If the election relates to only part of the gain on the realisation of an asset |
| |
treated as occurring under section 780 or 785, Chapter 7 and this section apply |
| |
as if the realisation treated as occurring had been of a separate asset |
| |
representing a corresponding part of the asset. |
| 30 |
(6) | If subsection (5) applies, any necessary apportionments must be made |
| |
| |
795 | Recovery of charge from another group company or controlling director |
| |
(1) | This section applies if— |
| |
(a) | a company (“A”) is liable to a degrouping charge, |
| 35 |
(b) | an amount of corporation tax has been assessed on A for the relevant |
| |
| |
(c) | the whole or part of that amount is unpaid at the end of the period of 6 |
| |
months after the time when it became payable. |
| |
(2) | An officer of Revenue and Customs may serve a notice on the persons to whom |
| 40 |
this subsection applies (see subsections (3) and (4)) requiring them to pay the |
| |
| |
(a) | the amount of corporation tax referable to the degrouping charge (see |
| |
| |
|
| |
|
| |
|
(b) | the amount that remains unpaid of the corporation tax payable for the |
| |
relevant accounting period by A. |
| |
(3) | If A was a member of a group at the relevant time, subsection (2) applies to— |
| |
(a) | a company that was at that time the principal company of the group, |
| |
| 5 |
(b) | any other company that at any time in the period of 12 months ending |
| |
| |
(i) | was a member of that group, and |
| |
(ii) | owned the relevant asset or any part of it. |
| |
(4) | If at the relevant time A is not UK resident but carries on a trade in the United |
| 10 |
Kingdom through a permanent establishment, subsection (2) applies to any |
| |
person who is a controlling director— |
| |
| |
(b) | of a company that has control of A, |
| |
(c) | of a company that had control of A within the period of 12 months |
| 15 |
ending with the relevant time, |
| |
| or was such a controlling director during that period. |
| |
(5) | Section 796 applies for the interpretation of this section and in that section |
| |
references to “A” must be read in accordance with this section. |
| |
796 | Interpretation of section 795 |
| 20 |
(1) | For the purposes of section 795 and this section— |
| |
“the relevant accounting period” is the accounting period in which the |
| |
degrouping charge falls to be brought into account by A, |
| |
| |
(a) | in a case within section 780, when A ceased to be a member of |
| 25 |
| |
| |
qualifying condition (within the meaning of that section), and |
| |
(c) | if there has been an election under section 792, the time that |
| |
would have been the relevant time under paragraph (a) or (b) |
| 30 |
had there been no such election, and |
| |
“the relevant asset” is the asset in respect of which the degrouping charge |
| |
| |
(2) | For the purposes of section 795 the amount of corporation tax referable to a |
| |
degrouping charge is the difference between— |
| 35 |
(a) | the tax in fact payable for the relevant accounting period, and |
| |
(b) | the tax that would have been payable for that period in the absence of |
| |
| |
(3) | References in section 795 and this section to a degrouping charge are to— |
| |
(a) | a credit required to be brought into account under section 780(3) or |
| 40 |
| |
(b) | if there has been an election under section 792, a credit required to be |
| |
brought into account as a result of the election. |
| |
(4) | In section 795 and this section— |
| |
“director”, in relation to a company— |
| 45 |
|
| |
|
| |
|
(a) | has the meaning given by section 67(1) of ITEPA 2003 (read with |
| |
section 67(2) of that Act) and |
| |
(b) | includes any person falling within section 417(5) of ICTA (read |
| |
with section 417(6) of that Act), |
| |
“controlling director”, in relation to a company, means a director of the |
| 5 |
company who has control of it, and |
| |
“group” and “principal company” have the meaning that would be given |
| |
by Chapter 8 if in that Chapter for references to 75% subsidiaries there |
| |
were substituted references to 51% subsidiaries. |
| |
(5) | In subsection (4) “control” has the meaning given by section 416(2) to (6) of |
| 10 |
| |
797 | Recovery under section 795: procedure etc |
| |
(1) | A notice served under section 795(2) may require the payment of the amount |
| |
required to be paid by the notice within 30 days of the service of the notice. |
| |
(2) | The notice must state— |
| 15 |
(a) | the amount of the tax referable to the degrouping charge (within the |
| |
meaning given in section 796(2)), |
| |
(b) | the amount of corporation tax assessed on A for the relevant accounting |
| |
period that remains unpaid, |
| |
(c) | the date when it first became payable, and |
| 20 |
(d) | the amount required to be paid by the person on whom the notice is |
| |
| |
(3) | 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 |
| 25 |
(b) | for the purposes of appeals, |
| |
| as if it were a notice of assessment and that amount were an amount of tax due |
| |
| |
(4) | A person who has paid an amount required to be paid by a notice under section |
| |
795(2) may recover the amount paid from A. |
| 30 |
(5) | A payment required to be made by such a notice is not allowed as a deduction |
| |
in calculating any income, profits or losses for any tax purposes. |
| |
(6) | In this section “A” and “the relevant accounting period” have the same |
| |
meaning as in section 795 (see section 795(1) and section 796(1) respectively). |
| |
798 | Recovery under section 795: time limit |
| 35 |
(1) | A notice under section 795(2) must be served before the end of the period of 3 |
| |
years beginning with the date on which A’s liability to corporation tax for the |
| |
relevant accounting period is finally determined. |
| |
(2) | In subsection (1) “A” and “the relevant accounting period” have the same |
| |
meaning as in section 795 (see section 795(1) and section 796(1) respectively). |
| 40 |
(3) | If the unpaid tax is charged because of a determination under paragraph 36 or |
| |
37 of Schedule 18 to FA 1998 (determination where no return delivered or |
| |
return incomplete), the date mentioned in subsection (1) is the date on which |
| |
the determination was made. |
| |
|
| |
|