Corporation Tax Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 11 — Transfer of business or trade
390

(b)
the transferor receives no part of the consideration for the transfer
(otherwise than by the transferee taking over the whole or part of the
liabilities of the business),

but see subsections (3) to (5).
(2)
If the transfer includes intangible fixed assets that—
5
(a)
are chargeable intangible assets in relation to the transferor
immediately before the transfer, and
(b)
are chargeable intangible assets in relation to the transferee
immediately after the transfer,

the transfer of those assets is tax-neutral for the purposes of this Part.
10
(3)
This section does not apply if the transfer is one to which section 775 (transfers
within a group) applies.
(4)
This section does not apply if the transferor or the transferee is—
(a)
a qualifying society within the meaning of section 461A of ICTA
(incorporated friendly societies entitled to exemption from tax), or
15
(b)
a dual resident investing company within the meaning of section 404 of
that Act (limitation of group relief).
(5)
This section applies only if the reconstruction meets the genuine commercial
transaction requirement (see section 831).
(6)
In this section “scheme of reconstruction” has the same meaning as it has in
20
section 136 of TCGA.
819
European cross-border transfers of business: introduction
(1)
Section 820 applies if—
(a)
condition A or B is met, and
(b)
each of the companies mentioned in subsection (2)(a) or (3)(a) makes a
25
claim under this section,

but see section 820(2) and (3).
(2)
Condition A is that—
(a)
an EU company resident in one member State transfers the whole or
part of the business carried on by it in the United Kingdom to an EU
30
company resident in another member State, and
(b)
the transfer is wholly in exchange for securities issued by the transferee
to the transferor.
(3)
Condition B is that—
(a)
an EU company transfers part of its business to one or more EU
35
companies,
(b)
the transferor is resident in one member State,
(c)
the part of the transferor’s business which is transferred is carried on
by the transferor in the United Kingdom,
(d)
at least one transferee is resident in a member State other than that in
40
which the transferor is resident,
(e)
the transferor continues to carry on a business after the transfer, and
(f)
the transfer—

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 11 — Transfer of business or trade
391

(i)
is made in exchange for the issue of shares in or debentures of
each transferee to the persons holding shares in or debentures
of the transferor, or
(ii)
is not so made only because, and only so far as, a transferee is
prevented from so issuing such shares or debentures by section
5
658 of the Companies Act 2006 (c. 46) (general rule against
limited company acquiring own shares) or by a corresponding
provision of the law of another member State preventing such
an issue.
(4)
For the purposes of this Chapter, a company is resident in a member State if—
10
(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 purpose of any double taxation relief
arrangements to which the State is a party, as resident in a territory not
within a member State.
15
(5)
In this section and section 820—
(a)
“company” means any entity listed as a company in the Annex to the
Mergers Directive,
(b)
“EU company” means a body incorporated under the law of a member
State,
20
(c)
“securities” includes shares,
(d)
“transferee” has the same meaning as in subsection (2) or (3), and
(e)
“the transferor” has the same meaning as in subsection (2) or (3).
820
Transfer of assets on European cross-border transfer of business
(1)
If the transfer of business includes intangible fixed assets that—
25
(a)
are chargeable intangible assets in relation to the transferor
immediately before the transfer, and
(b)
are chargeable intangible assets in relation to the transferee
immediately after the transfer,

the transfer of those assets is tax-neutral for the purposes of this Part.
30
(2)
This section applies only if the transfer of the business or part meets the
genuine commercial transaction requirement (see section 831).
(3)
This section does not apply if the transferor is a transparent entity.
(4)
In this section—
“the transfer of business” means the transfer of business mentioned in
35
section 819(2)(a) or (3)(a), and
“transparent entity” means a company which is resident in a member
State other than the United Kingdom and does not have an ordinary
share capital.
(5)
For the purposes of subsection (4) an entity is resident in a member State if—
40
(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.
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Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 11 — Transfer of business or trade
392

821
European cross-border mergers: introduction
(1)
Section 822 applies if the following conditions are met in the case of any
merger—
(a)
conditions A, B and C,
(b)
in the case of a merger within subsection (2)(a), (b) or (c), condition D,
5
and
(c)
in the case of a merger within subsection (2)(c) or (d), condition E,

but see section 822(3) to (5)).
(2)
Condition A is that—
(a)
an SE is formed by the merger of two or more companies in accordance
10
with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) No.
2157/2001 on the Statute for a European company (Societas Europaea),
(b)
an SCE is formed by the merger of two or more co-operative societies,
at least one of which is a society registered under the Industrial and
Provident Societies Act 1965 (c. 12), in accordance with Articles 2(1) and
15
19 of Council Regulation (EC) No. 1435/2003 on the Statute for a
European Co-operative Society (SCE),
(c)
a merger is effected by the transfer by one or more companies of all
their assets and liabilities to a single existing company, or
(d)
a merger is effected by the transfer by two or more companies of all
20
their assets and liabilities to a single new company (other than an SE or
an SCE) in exchange for the issue by the transferee, to each person
holding shares in or debentures of a transferor, of shares or debentures.
(3)
Condition B is that each merging company is resident in a member State.
(4)
Condition C is that the merging companies are not all resident in the same
25
State.
(5)
Condition D is that—
(a)
the transfer of assets and liabilities to the transferee in the course of the
merger is made in exchange for the issue of shares or debentures by the
transferee to each person holding shares in or debentures of a
30
transferor, or
(b)
that transfer of those assets and liabilities is not so made only because,
and only so far as, a transferee is prevented from so issuing such shares
or debentures by section 658 of the Companies Act 2006 (c. 46) (general
rule against limited company acquiring own shares) or by a
35
corresponding provision of the law of another member State
preventing such an issue.
(6)
Condition E is that in the course of the merger each transferor ceases to exist
without being in liquidation (within the meaning given by section 247 of the
Insolvency Act 1986 (c. 45)).
40
(7)
For the meaning of expressions used in this section, see section 823.
822
Transfer of assets on European cross-border merger
(1)
If this section applies, the transfer of qualifying assets in the course of the
merger is tax-neutral for the purposes of this Part.
(2)
For the purposes of this section an asset is a qualifying asset if—
45

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 11 — Transfer of business or trade
393

(a)
it is a chargeable intangible asset in relation to the transferor
immediately before the transfer, and
(b)
it is a chargeable intangible asset in relation to the transferee
immediately after the transfer.
(3)
This section does not apply if section 818 (company reconstruction involving
5
transfer of business) applies to any qualifying assets transferred in the course
of the merger.
(4)
This section does not apply if—
(a)
one or more of the merging companies is a transparent entity, and
(b)
the assets and liabilities of a transparent entity are transferred to
10
another company in the course of the merger.
(5)
This section applies only if the merger meets the genuine commercial
transaction requirement (see section 831).
(6)
For the meaning of expressions used in this section, see section 823.
823
Interpretation of sections 821 and 822
15
(1)
This section applies for the interpretation of sections 821 and 822 and this
section.
(2)
“Transferor” means—
(a)
in relation to a merger within section 821(2)(a), a company merging to
form the SE,
20
(b)
in relation to a merger within section 821(2)(b), a co-operative society
merging to form the SCE, and
(c)
in relation to a merger within section 821(2)(c) or (d), each company
transferring all its assets and liabilities.
(3)
“Transferee” means—
25
(a)
in relation to a merger within section 821(2)(a), the SE,
(b)
in relation to a merger within section 821(2)(b), the SCE, and
(c)
in relation to a merger within section 821(2)(c) or (d), the company to
which assets and liabilities are transferred.
(4)
“Transparent entity” has the meaning given in section 820(4).
30
(5)
References to a company are references to any entity listed as a company in the
Annex to the Mergers Directive.
(6)
In section 821 and this section “co-operative society” means a society registered
under the Industrial and Provident Societies Act 1965 (c. 12) or a similar society
governed by the law of a member State other than the United Kingdom.
35
824
Transfer of business of building society to company
(1)
This section applies if—
(a)
there is a transfer of the whole of a building society’s business to a
company (“the successor company”) in accordance with section 97 and
the other applicable provisions of the Building Societies Act 1986 (c. 53),
40
(b)
the transfer includes intangible fixed assets,
(c)
those assets are chargeable intangible assets in relation to the society
immediately before the transfer, and

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 11 — Transfer of business or trade
394

(d)
those assets are chargeable intangible assets in relation to the successor
company immediately after the transfer.
(2)
The transfer of those assets is tax-neutral for the purposes of this Part.
(3)
For the application of sections 780 and 785 in cases where this section applies,
see section 825.
5
(4)
In that section “the successor company” has the same meaning as in this
section.
825
Application of sections 780 and 785 where transfer within section 824 occurs
(1)
This section deals with the application of—
(a)
section 780 (deemed realisation and reacquisition at market value), and
10
(b)
section 785 (principal company becoming member of another group),

where there is a transfer within section 824.
(2)
If, because of the transfer, a company ceases to be a member of the same group
as the building society, that event does not cause section 780 or 785 to apply as
respects any asset acquired by the company from the building society or any
15
other member of the same group.
(3)
If the building society and the successor company are members of the same
group at the time of the transfer but later cease to be, that later event does not
cause section 780 or 785 to apply to any asset to which this subsection applies.
(4)
Subsection (3) applies to—
20
(a)
any asset acquired by the successor company on or before the transfer
from the building society or any other member of that same group, or
(b)
any asset acquired from the building society or any other member of
that group by a company other than the successor company that is a
member of that group at the time of the transfer.
25
(5)
Subsection (6) applies if a company which is a member of the same group as
the building society at the time of the transfer—
(a)
ceases to be a member of that group and becomes a member of the same
group as the successor company, and
(b)
later ceases to be a member of that group.
30
(6)
Section 780 applies on that later event as if any asset to which this subsection
applies that has not been acquired from the successor company had been so
acquired.
(7)
Subsection (6) applies to—
(a)
any asset acquired by the company from the building society when the
35
company and the building society were members of the same group, or
(b)
any asset acquired by the company from another company which is a
member of the same group at the time of the transfer, when the
company, the building society and the other company, were members
of the same group.
40
(8)
Subsection (6) does not apply if—
(a)
the company which acquired the asset is a 75% subsidiary of the
company from which it was acquired, or vice versa,

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 11 — Transfer of business or trade
395

(b)
those companies cease simultaneously to be members of the same
group as the successor company, and
(c)
those companies continue to be members of the same group as one
another.
826
Amalgamation of, or transfer of engagements by, certain societies
5
(1)
This section applies if—
(a)
two or more societies to which this section applies amalgamate or there
is a transfer of engagements from one such society to another,
(b)
in the course of the amalgamation or transfer of engagements or as part
of it intangible fixed assets are transferred from one society (“the
10
transferor”) to another (“the transferee”),
(c)
those assets are chargeable intangible assets in relation to the transferor
immediately before the transfer, and
(d)
those assets are chargeable intangible assets in relation to the transferee
immediately after the transfer.
15
(2)
The transfer of those assets is tax-neutral for the purposes of this Part.
(3)
This section applies to—
(a)
a building society,
(b)
a registered industrial and provident society, and
(c)
a co-operative association in relation to which section 486(1) and (8) of
20
ICTA has effect as it has effect in relation to a registered industrial and
provident society.
Transfer of assets to non-UK resident company
827
Claims to postpone charge on transfer
(1)
This section applies if—
25
(a)
a UK resident company carrying on a trade outside the United
Kingdom through a permanent establishment (“the transferor”)
transfers that trade or part of it to a non-UK resident company (“the
transferee”),
(b)
the transfer meets conditions A, B and C,
30
(c)
the transfer includes intangible fixed assets that are chargeable
intangible assets in relation to the transferor immediately before the
transfer (“relevant assets”), and
(d)
the transferor makes a claim under this section.
(2)
If this section applies, this Part applies in accordance with sections 828 to 830.
35
(3)
Condition A is that the transfer includes—
(a)
the whole assets of the transferor used for the purposes of the trade or
part, or
(b)
the whole of those assets other than cash.
(4)
Condition B is that the transfer is wholly or partly in exchange for securities
40
consisting of—
(a)
shares within subsection (5) that are issued by the transferee to the
transferor, or

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 11 — Transfer of business or trade
396

(b)
shares within paragraph (a) and loan stock that is so issued.
(5)
Shares are within this subsection if they—
(a)
amount in all to at least one quarter of the ordinary share capital of the
transferee, or
(b)
do so if taken together with any other shares in the transferee already
5
held by the transferor.
(6)
Condition C is that the transfer meets the genuine commercial transaction
requirement (see section 831).
(7)
No claim may be made under this section if a claim is made in relation to the
transfer under section 807B(6) of ICTA (European cross-border transfers of
10
business: application for section 807C of that Act to apply).
(8)
In sections 828 to 830 “transferor”, “transferee” and “relevant assets” have the
same meaning as in this section.
828
Relief on transfer
(1)
If the proceeds of realisation of a relevant asset exceed the cost of the asset
15
recognised for tax purposes, the proceeds are treated as reduced.
(2)
If the securities are the whole consideration for the transfer, the reduction is by
the amount of the excess.
(3)
If the securities are not the whole of that consideration, the reduction is by the
appropriate proportion of the excess.
20
(4)
In subsection (3) “the appropriate proportion” means the proportion that the
market value of the securities at the time of the transfer bears to the market
value of the whole of the consideration at that time.
829
Charge on subsequent realisations
(1)
If at any time after the transfer the transferor realises the whole or part of the
25
securities held by it immediately before that time, the transferor must bring
into account for tax purposes a credit equal to the whole or the appropriate
proportion of the total deferred gain.
(2)
In subsection (1)—
“the total deferred gain” means the sum of the amounts by which the
30
proceeds of realisation of relevant assets were reduced under section
828(2) or (3), so far as not already taken into account under subsection
(1) or (3) of this section, and
“the appropriate proportion” means the proportion that the market value
of the part of the securities realised bears to the market value of the
35
securities held immediately before the realisation.
(3)
If at any time within 6 years after the transfer the transferee realises all or some
of the relevant assets held by it immediately before that time, the transferor
must bring into account for tax purposes a credit equal to the whole or the
appropriate proportion of the total deferred gain.
40
(4)
In subsection (3)—
“the total deferred gain” has the meaning given in subsection (2), and