PART 1Income Tax, Corporation Tax and Capital Gains Tax
CHAPTER 5Other provisions
Disincorporation
58Disincorporation relief
1
A claim for relief under this section (“disincorporation relief”) may be made where—
a
a company transfers its business to some or all of the shareholders of the company,
b
the transfer of the business is a qualifying business transfer (see section 59), and
c
the business transfer date falls within the period of 5 years beginning with 1 April 2013.
2
As to the consequences of a claim for disincorporation relief being made, see—
sections 162B and 162C of TCGA 1992;
section 849A of CTA 2009.
3
In this section and sections 59 to 61 “the business transfer date”, in relation to the transfer of a business, is the date on which the business is transferred.
For this purpose, where the business is transferred under a contract—
a
the date on which the business is transferred is to be determined in accordance with section 28 of TCGA 1992, and
b
if the business in question is transferred by more than one contract, then for the purposes of that section the contract under which the business is transferred is to be taken to be the contract under which the goodwill of the business is transferred.
4
This section and sections 59 and 60 apply to a transfer of a business with a business transfer date of 1 April 2013 or a later date.
59Qualifying business transfer
1
The transfer of a business from a company to some or all of the shareholders of the company is a qualifying business transfer for the purposes of section 58 if conditions A to E are met.
2
Condition A is that the business is transferred as a going concern.
3
Condition B is that the business is transferred together with all of the assets of the business, or together with all of those assets other than cash.
4
Condition C is that the total market value of the qualifying assets of the business included in the transfer does not exceed £100,000.
5
Condition D is that all of the shareholders to whom the business is transferred are individuals.
6
Condition E is that each of those shareholders held shares in the company throughout the period of 12 months ending with the business transfer date.
7
For the purposes of condition D, the reference to individuals includes an individual acting as a member of a partnership, but does not include an individual acting as a member of a limited liability partnership.
8
Section 60 of TCGA 1992 (nominees and bare trustees) applies for the purposes of this section as it applies for the purposes of that Act.
9
In this section “market value”, in relation to an asset, means the price which the asset might reasonably be expected to fetch on a sale in the open market.
10
In this section a “qualifying asset” means—
a
goodwill, or
b
an interest in land which is not held as trading stock.
60Making a claim
1
A claim for disincorporation relief under section 58—
a
is to be made jointly by the company and all of the shareholders to whom the business is transferred, and
b
is irrevocable.
2
Any claim for disincorporation relief must be made within the period of 2 years beginning with the business transfer date.
61Effect of disincorporation relief
1
In Part 5 of TCGA 1992 (transfer of business assets), in Chapter 1 (general provisions), after section 162A insert—
Transfer of business from company to shareholders
162BDisincorporation relief: assets (including pre-FA 2002 goodwill)
1
This section applies where—
a
a company transfers its business to some or all of the shareholders of the company, and
b
a claim for disincorporation relief in respect of the transfer has been made under section 58 of the Finance Act 2013.
2
The disposal and acquisition of any qualifying asset of the business included in the transfer is to be deemed to be for a consideration equal to the lower of—
a
the sums allowable under section 38 as a deduction in the computation of the gain accruing to the company on the disposal of the asset in question, and
b
the market value of the asset.
3
In subsection (2) a “qualifying asset” means—
a
goodwill, or
b
an interest in land which is not held as trading stock.
4
But subsection (2) does not apply to the goodwill of the business if section 162C applies to it.
162CDisincorporation relief: post-FA 2002 goodwill
1
This section applies where—
a
a company transfers its business to some or all of the shareholders of the company,
b
a claim for disincorporation relief in respect of the transfer has been made under section 58 of the Finance Act 2013, and
c
section 849A of CTA 2009 (disincorporation relief: transfer values for post-FA 2002 goodwill) applies to the transfer of the goodwill of the business.
2
The acquisition of the goodwill of the business is deemed to be for a consideration equal to the value at which the goodwill is treated as transferred by virtue of section 849A of CTA 2009.
2
In Part 8 of CTA 2009 (intangible fixed assets), Chapter 13 (transactions between related parties) is amended as follows.
3
In section 844 (overview of Chapter), in subsection (2) for “849” substitute “
849A
”
.
4
In section 845 (transfer between company and related party treated as at market value), in subsection (4) (exceptions to basic rule)—
a
omit the “and” at the end of paragraph (ca), and
b
after paragraph (d) insert
, and
e
section 849A (disincorporation relief: transfer values for post-FA 2002 goodwill).
5
After section 849 insert—
849ADisincorporation relief: transfer values for post-FA 2002 goodwill
1
This section applies where—
a
a company transfers its business to some or all of the shareholders of the company, and
b
a claim for disincorporation relief in respect of the transfer has been made under section 58 of the Finance Act 2013.
2
If section 735 applies to the transfer of the goodwill of the business, the transfer is treated for the purposes of this Part as being at the lower of—
a
the tax written-down value of the goodwill, and
b
its market value.
3
If section 736 applies to the transfer of the goodwill of the business, the transfer is treated for the purposes of this Part as being at the lower of—
a
the cost of the goodwill, and
b
its market value.
4
If section 738 applies to the transfer of the goodwill of the business, the proceeds of realisation of the goodwill are treated for the purposes of this Part as being nil.
5
In subsection (2)(a) the reference to the tax written-down value of the goodwill is to its tax written-down value immediately before the transfer.
6
In subsection (3)(a) “the cost of the goodwill” means the cost recognised for tax purposes (determined in accordance with section 736(6) and (7)).
7
In this section market value has the meaning given in section 845(5).
6
The amendments made by this section have effect in relation to a transfer of a business with a business transfer date of 1 April 2013 or a later date.