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 7 — Roll-over relief in case of realisation and reinvestment
365

761
Declaration of provisional entitlement to relief
(1)
A company realising an intangible fixed asset may make a declaration of
provisional entitlement to relief under this Chapter.
(2)
While the declaration continues in force, this Chapter applies as if the
conditions for relief under this Chapter were met.
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(3)
A declaration of provisional entitlement is a declaration by the company, in its
company tax return for the accounting period in which the realisation takes
place, that the company—
(a)
has realised an intangible fixed asset,
(b)
proposes to meet the conditions for relief under this Chapter, and
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(c)
accordingly is provisionally entitled to relief of a specified amount.
(4)
A declaration of provisional entitlement ceases to have effect if or to the extent
that—
(a)
it is withdrawn, or
(b)
it is superseded by a claim for relief under this Chapter.
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(5)
So far as not previously withdrawn or superseded, a declaration of provisional
entitlement ceases to have effect 4 years after the end of the accounting period
in which the realisation took place.
(6)
If a declaration of provisional entitlement ceases to have effect, in whole or in
part, all necessary adjustments must be made, by assessment or otherwise.
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(7)
Subsection (6) applies despite any limitation on the time within which
assessments or amendments may be made.
762
Realisation and reacquisition
If a company realises an asset and subsequently reacquires it, this Chapter
applies as if what is reacquired were a different asset from that previously
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realised.
763
Disregard of deemed realisations and reacquisitions
(1)
This Chapter does not apply in relation to a realisation of an asset that does not
actually occur but is treated as occurring, except as provided by—
(a)
section 791 (application of roll-over relief in relation to degrouping
30
charge), or
(b)
section 794 (application of roll-over relief in relation to reallocated
charge).
(2)
Reacquisitions that do not actually occur but are treated as occurring are
ignored for the purposes of this Chapter.
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Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 8 — Groups of companies: introduction
366

Chapter 8
Groups of companies: introduction
Introductory
764
Meaning of “company”, “group” and “subsidiary”
(1)
This Chapter applies for the purposes of this Part to determine whether
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companies form a group and, where they do, which is the principal company
of the group.
(2)
In this Chapter, references to a company apply only to—
(a)
a company within the meaning of the Companies Act 2006 (c. 46),
(b)
a company (other than a limited liability partnership) constituted
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under any other Act or by a Royal Charter or letters patent,
(c)
a company formed under the law of a country or territory outside the
United Kingdom,
(d)
a registered industrial and provident society,
(e)
an incorporated friendly society within the meaning of the Friendly
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Societies Act 1992 (c. 40), or
(f)
a building society.
(3)
In this Part “group” and “subsidiary” must be read with any necessary
modifications if applied to a company formed under the law of a country or
territory outside the United Kingdom.
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Rules
765
General rule: a company and its 75% subsidiaries form a group
(1)
The general rule is that—
(a)
a company (“A”) and all its 75% subsidiaries form a group, and
(b)
if any of those subsidiaries have 75% subsidiaries, the group includes
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them and their 75% subsidiaries, and so on.
(2)
A is referred to in this Chapter and in Chapter 9 as the principal company of
the group.
(3)
Subsections (1) and (2) are subject to the following provisions of this Chapter.
766
Only effective 51% subsidiaries of principal company to be members of group
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(1)
A group of companies does not include any company (other than the principal
company of the group) that is not an effective 51% subsidiary of the principal
company of the group.
(2)
For the meaning of “effective 51% subsidiary”, see section 771.
767
Principal company cannot be 75% subsidiary of another company
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(1)
The general rule is that a company (“A”) is not the principal company of a
group if it is itself a 75% subsidiary of another company (“B”).

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 8 — Groups of companies: introduction
367

(2)
That rule is subject to subsection (3).
(3)
A is the principal company of a group (“group C”) if—
(a)
A and B are prevented from being members of another group by section
766,
(b)
the requirements of sections 765 and 766 are met in relation to group C,
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and
(c)
A being the principal company of group C does not enable a further
company to be the principal company of a group of which A would be
a member.
768
Company cannot be member of more than one group
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(1)
A company cannot be a member of more than one group.
(2)
If, apart from subsection (1), a company (“A”) would be a member of 2 or more
groups, the group of which it is a member is determined by applying the rules
in subsections (4), (6), (7) and (8) successively in that order until an answer is
obtained.
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(3)
In those subsections the principal company of each group is referred to as its
head.
(4)
A is a member of the group of which it would be a member if in applying
section 766 (only effective 51% subsidiaries of principal company to be
members of group) the amounts specified in subsection (5) were ignored.
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(5)
Those amounts are—
(a)
any amount to which a head of a group is beneficially entitled of any
profits available for distribution to equity holders of a head of another
group (see section 772), and
(b)
any amount to which a head of a group would be beneficially entitled
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of any assets of a head of another group available for distribution to its
equity holders on a winding up (see that section).
(6)
A is a member of the group the head of which is beneficially entitled to a
percentage of the profits available for distribution to A’s equity holders that is
greater than the percentage of those profits to which any other head of a group
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is so entitled.
(7)
A is a member of the group the head of which would be beneficially entitled to
a percentage of any of A’s assets available for distribution to its equity holders
on a winding up that is greater than the percentage of those assets to which any
other head of a group would be so entitled.
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(8)
A is a member of the group the head of which owns directly or indirectly a
percentage of A’s ordinary share capital that is greater than the percentage of
that capital owned directly or indirectly by any other head of a group.
(9)
Section 838(2) to (10) of ICTA applies for the interpretation of subsection (8) as
it applies for the interpretation of section 838(1)(a) of that Act (definition of
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“51% subsidiary”).
769
Continuity of identity of group
(1)
A group of companies remains the same group of companies for the purposes
of this Part so long as the same company is the principal company of the group.

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 8 — Groups of companies: introduction
368

(2)
If the principal company of a group becomes a member of another group—
(a)
the groups are treated as the same group for the purposes of this Part,
and
(b)
the question whether a company has ceased to be a member of a group
must be determined accordingly.
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(3)
The passing of a resolution or the making of an order, or any other act, for the
winding up of a company is not treated for the purposes of this Part as causing
any company to cease to be a member of any group of which it is a member.
770
Continuity where group includes an SE
(1)
This section applies if the principal company of a group (“Group 1”)—
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(a)
becomes an SE as a result of being the acquiring company in the
formation of an SE by merger by acquisition (in accordance with
Articles 2(1), 17(2)(a) and 29(1) of Council Regulation (EC) No 2157/
2001 on the Statute for a European company),
(b)
becomes a subsidiary of a holding SE (formed in accordance with
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Article 2(2) of that Regulation), or
(c)
is transformed into an SE (in accordance with Article 2(4) of that
Regulation).
(2)
For the purposes of this Part—
(a)
Group 1 and any group of which the SE is a member on formation is
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treated as the same, and
(b)
the question whether a company has ceased to be a member of a group
must be determined accordingly.
771
Meaning of “effective 51% subsidiary”
(1)
For the purposes of this Part a company (“the subsidiary”) is an effective 51%
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subsidiary of another company (“the parent”) if (and only if) conditions A and
B are met.
(2)
Condition A is that the parent is beneficially entitled to more than 50% of any
profits available for distribution to equity holders of the subsidiary (see section
772).
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(3)
Condition B is that the parent would be beneficially entitled to more than 50%
of any assets of the subsidiary available for distribution to its equity holders on
a winding up (see section 772).
772
Equity holders and profits or assets available for distribution
(1)
Schedule 18 to ICTA (group relief: equity holders and profits or assets available
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for distribution) applies for the purposes of sections 768 and 771.
(2)
In that Schedule as it applies for those purposes—
(a)
for any reference to sections 403C and 413(7) of ICTA, or either of those
provisions, substitute a reference to sections 768 and 771,
(b)
omit the words in paragraph 1(4) from “but” to the end, and
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(c)
omit paragraphs 5(3), 5B to 5F and 7(1)(b).