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Corporation Tax Bill


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

397

 

“the appropriate proportion” means the proportion that the deferred gain

attributable to the relevant assets realised bears to the deferred gain

attributable to the relevant assets held immediately before the

realisation.

(5)   

For the purposes of subsection (4) the deferred gain attributable to relevant

5

assets means the sum of the amounts by which the proceeds of realisation of

those assets were reduced under section 828(2) or (3).

(6)   

For cases where transfers are ignored for the purposes of subsection (1) or (3),

see section 830.

830     

Exclusion from section 829 of group transfers

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(1)   

For the purposes of section 829(1), any disposal within section 171 of TCGA

1992 (transfers within a group) is ignored.

(2)   

For the purposes of section 829(3), any transfer by one member of a group to

another is ignored.

(3)   

This subsection applies if—

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(a)   

a person (“A”) acquires securities on a transfer that is ignored under

subsection (1), and

(b)   

any previous transfer that has occurred was ignored under subsection

(1) or (2).

(4)   

If subsection (3) applies, a subsequent realisation of the securities by A is

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treated as a realisation by the transferor.

(5)   

This subsection applies if—

(a)   

a person (“B”) acquires an asset on a transfer that is ignored under

subsection (2), and

(b)   

no previous transfer has occurred that was not ignored under

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subsection (1) or (2).

(6)   

If subsection (5) applies, a subsequent realisation of the asset by B is treated as

a realisation by the transferee.

The genuine commercial transaction requirement and clearance

831     

The genuine commercial transaction requirement and clearance

30

(1)   

For the purposes of this Chapter, a reconstruction, transfer or merger meets the

genuine commercial transaction requirement if it—

(a)   

is effected for genuine commercial reasons, and

(b)   

does not form part of a scheme or arrangements of which the main

purpose, or one of the main purposes, is avoidance of liability to

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corporation tax, capital gains tax or income tax.

(2)   

The conditions in subsection (1) are treated as met if before the reconstruction,

transfer or merger—

(a)   

the appropriate applicant has applied to the Commissioners for Her

Majesty’s Revenue and Customs, and

40

(b)   

the Commissioners have notified the appropriate applicant that they

are satisfied that the requirements of subsection (1) will be met.

 
 

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

398

 

(3)   

In subsection (2) “the appropriate applicant” means—

(a)   

in the case of an application about a reconstruction within section

818(1)(a), the transferee (within the meaning of that section),

(b)   

in the case of an application about a transfer falling within section 820

because condition A in section 819(2) is met, the transferor and the

5

transferee (within the meaning of section 819(2)),

(c)   

in the case of an application about a transfer falling within section 820

because condition B in section 819(3) is met, the transferor and the

transferee (within the meaning of section 819(3)),

(d)   

in the case of an application about a merger falling within section

10

821(2), the transferor (as defined in section 823(2)), and

(e)   

in the case of an application about a transfer falling within section

827(1)(a), the transferor (within the meaning of that section).

(4)   

For the procedure on such an application, see section 832.

832     

Procedure on application for clearance

15

(1)   

This section applies in relation to an application under section 831(2).

(2)   

The application must be in writing and must contain particulars of the

operations that are to be effected.

(3)   

The Commissioners for Her Majesty’s Revenue and Customs may by notice

require the applicant to provide further particulars for the purpose of enabling

20

them to make their decision.

(4)   

Such a notice may only be given within 30 days of the receipt of the application

or of any further particulars previously required under subsection (3).

(5)   

If such a notice is not complied with within 30 days or such longer period as

the Commissioners for Her Majesty’s Revenue and Customs may allow, they

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need not proceed further on the application.

833     

Decision on application for clearance

(1)   

The Commissioners for Her Majesty’s Revenue and Customs must notify their

decision on an application under section 831(2) to the applicant—

(a)   

within 30 days of receiving the application, or

30

(b)   

if they give a notice under section 832(3), within 30 days of the notice

being complied with.

(2)   

If the Commissioners for Her Majesty’s Revenue and Customs—

(a)   

notify the applicant that they are not satisfied that the conditions in

section 831(1) will be met, or

35

(b)   

do not notify their decision to the applicant within the time required by

subsection (1),

   

the applicant may within 30 days of the notification or of that time require

them to transmit the application to the tribunal, together with any notice given

and further particulars provided under section 832(3).

40

(3)   

In that case any notification by the tribunal has effect for the purposes of

section 831(2)(b) as if it were a notification by the Commissioners for Her

Majesty’s Revenue and Customs.

 
 

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 12 — Related parties

399

 

(4)   

If any particulars provided under section 832 do not fully and accurately

disclose all facts and considerations material for the decision—

(a)   

of the Commissioners for Her Majesty’s Revenue and Customs, or

(b)   

of the tribunal,

   

any resulting notification by the Commissioners for Her Majesty’s Revenue

5

and Customs or the tribunal is void.

Chapter 12

Related parties

Introductory

834     

Overview of Chapter

10

(1)   

This Chapter deals with the question whether a person and a company are

related parties for the purposes of this Part.

(2)   

That question is relevant, in particular, for Chapter 13 (transactions between

related parties).

Meaning of “related party", “control” and “major interest”

15

835     

“Related party”

(1)   

This section explains when a person (“A”) is a “related party” in relation to a

company (“B”) for the purposes of this Part.

(2)   

In a case where A is a company, A is a related party in relation to B if—

(a)   

A has control of, or holds a major interest in, B, or

20

(b)   

B has control of, or holds a major interest in, A.

(3)   

In a case where A is a company, A is a related party in relation to B if A and B

are both under the control of the same person (but see subsection (4)).

(4)   

Subsection (3) does not apply if the person controlling both A and B is—

(a)   

the Crown,

25

(b)   

a Minister of the Crown or a government department,

(c)   

the Scottish Ministers,

(d)   

the National Assembly for Wales,

(e)   

a Minister within the meaning of the Northern Ireland Act 1998 (c. 47)

or a Northern Ireland department,

30

(f)   

a foreign sovereign power, or

(g)   

an international organisation.

(5)   

A is a related party in relation to B if B is a close company and A is, or is an

associate of—

(a)   

a participator in B, or

35

(b)   

a participator in a company that has control of, or holds a major interest

in, B.

(6)   

In a case where A is a company, A is a related party in relation to B if B is

another company in the same group.

 
 

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 12 — Related parties

400

 

(7)   

A is treated as being a related party in relation to B if A would be so but for any

person (other than an individual) being the subject of—

(a)   

insolvency arrangements, or

(b)   

equivalent arrangements under the law of any country or territory,

whether made when the person is solvent or insolvent.

5

(8)   

In subsection (7) “insolvency arrangements” includes—

(a)   

arrangements under which a person acts as the liquidator, provisional

liquidator, receiver, administrator or administrative receiver of a

company or firm, and

(b)   

voluntary arrangements proposed or approved in relation to a

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company or firm under Part 1 of the Insolvency Act 1986 (c. 45) or Part

2 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I.

19)).

(9)   

In subsection (8)—

“administrative receiver” has the meaning given in section 251 of the

15

Insolvency Act 1986 or Article 5(1) of the Insolvency (Northern Ireland)

Order 1989,

“administrator” means a person appointed to manage the affairs, business

and property of the company or firm under Schedule B1 to that Act or

Order,

20

“receiver” means a person appointed as receiver of some or all of the

property of the company or firm under an enactment or under an

instrument issued for the purpose of representing security for, or the

rights of creditors in respect of, any debt.

(10)   

For the meaning of “control”, “major interest”, “associate”, “participator”, see

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sections 836, 837 and 841.

836     

“Control”

(1)   

For the purposes of this Chapter, in relation to a company, “control” means the

power of a person to secure that the company’s affairs are conducted in

accordance with the person’s wishes—

30

(a)   

by means of the holding of shares or the possession of voting power in

or in relation to the company or any other company, or

(b)   

as a result of powers conferred by the articles of association or other

document regulating the company or any other company.

(2)   

Sections 838 to 840 (rights and powers to be taken into account) apply in

35

relation to the determination for the purposes of this Chapter whether a person

has control of a company.

837     

“Major interest”

(1)   

For the purposes of this Chapter, a person has a “major interest” in a company

if—

40

(a)   

the person and one other person together have control of that company,

and

(b)   

the rights and powers by means of which they have such control

represent, in the case of each of them, at least 40% of the total.

 
 

Corporation Tax Bill
Part 8 — Intangible fixed assets
Chapter 12 — Related parties

401

 

(2)   

The reference in subsection (1)(a) to two persons together having control of a

company is to two persons who, taken together, have the power mentioned in

section 836.

(3)   

Sections 838 to 840 (rights and powers to be taken into account) apply in

relation to the determination for the purposes of this Chapter whether a person

5

has a major interest in a company.

Rights and powers to be taken into account

838     

General rule

(1)   

This section provides for a person (“A”) to be treated as having rights and

powers where A’s rights or powers are relevant in determining if a person—

10

(a)   

has control of a company, or

(b)   

has a major interest in a company.

(2)   

A is treated as having rights and powers that A—

(a)   

is entitled to acquire at a future date, or

(b)   

will, at a future date, become entitled to acquire.

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(3)   

A is treated as having rights and powers of other persons, so far as they are

required or may be required to be exercised in any one or more of the following

ways—

(a)   

on A’s behalf,

(b)   

under A’s direction, or

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(c)   

for A’s benefit.

(4)   

A is treated as having rights and powers of a person connected with A (see

section 842).

(5)   

A is treated as having rights and powers that a person connected with A would

be treated as having if that person were a person whose rights or powers are

25

relevant in determining if a person has control of or a major interest in a

company.

(6)   

For the purposes of subsections (3) to (5), a person is treated as having rights

or powers that the person—

(a)   

is entitled to acquire at a future date, or

30

(b)   

will, at a future date, become entitled to acquire.

(7)   

Subsection (3) does not apply to rights and powers conferred in relation to

property of a borrower by the terms of any security relating to the borrower’s

loan.

839     

Rights and powers held jointly

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(1)   

References in this Chapter—

(a)   

to rights and powers of a person, or

(b)   

to rights and powers that a person is or will become entitled to acquire,

   

include rights or powers that are exercisable by that person, or when acquired

will be exercisable by that person, only jointly with one or more other persons.

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(2)   

Subsection (1) is subject to section 840 (partnerships).

 
 

 
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