Finance Act 1996

Continuity of treatment: groups etc. U.K.

12 (1) Subject to paragraph 15 below, this paragraph applies where, as a result of—

[F1 (a) a related transaction between two companies that are—

(i) members of the same group, and

(ii) within the charge to corporation tax in respect of that transaction,

(b) a series of transactions having the same effect as a related transaction between two companies each of which—

(i) has been a member of the same group at any time in the course of that series of transactions, and

(ii) is within the charge to corporation tax in respect of the related transaction,]

(c) the transfer between two companies of the whole or part of the long term business of any insurance company in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the M1 Insurance Companies Act 1982, or

(d) any transfer between two companies which is a qualifying overseas transfer within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act 1988 (transfer of business of overseas life insurance company),

one of those companies (“the transferee company”) directly or indirectly replaces the other (“the transferor company”) as a party to a loan relationship.

(2) The credits and debits to be brought into account for the purposes of this Chapter in the case of the two companies shall be determined as follows—

(a) the transaction, or series of transactions, by virtue of which the replacement takes place shall be disregarded except for the purpose of identifying the company in whose case any debit or credit not relating to that transaction, or those transactions, is to be brought into account; and

(b) the transferor company and the transferee company shall be deemed (except for that purpose) to be the same company.

(3) This paragraph does not apply by virtue of sub-paragraph (1)(a) or (b) above in relation to any transfer of an asset, or of any rights under or interest in an asset, where the asset was within one of the categories set out in section 440(4)(a) to (e) of the Taxes Act 1988 (assets held for certain categories of long term business) either immediately before the transfer or immediately afterwards.

(4) This paragraph does not apply by virtue of sub-paragraph (1)(c) or (d) above in relation to any transfer of an asset, or of any rights under or interest in an asset, where—

(a) the asset was within one of the categories set out in section 440(4) of the Taxes Act 1988 immediately before the transfer; and

(b) is not within that category immediately afterwards.

(5) For the purposes of sub-paragraph (4) above, where one of the companies is an overseas life insurance company an asset shall be taken to be within the same category both immediately before the transfer and immediately afterwards if it—

(a) was within one category immediately before the transfer; and

(b) is within the corresponding category immediately afterwards.

(6) References in this paragraph to one company replacing another as a party to a loan relationship shall include references to a company becoming a party to any loan relationship under which its rights are equivalent to those of the other company under a loan relationship of which that other company has previously ceased to be a party.

(7) For the purposes of sub-paragraph (6) above a person’s rights under a loan relationship are equivalent to rights under another such relationship if they entitle the holder of an asset representing the relationship—

(a) to the same rights against the same persons as to capital, interest and dividends, and

(b) to the same remedies for the enforcement of those rights,

notwithstanding any difference in the total nominal amounts of the assets, in the form in which they are held or in the manner in which they can be transferred.

(8) Sub-paragraphs (4) and (5) of paragraph 11 above have effect for the purposes of this paragraph as they have effect for the purposes of that paragraph.

(9) In this paragraph “overseas life insurance company” has the same meaning as in Chapter I of Part XII of the Taxes Act 1988.

Textual Amendments

F1 Sch. 9 para. 12(1)(a)(b) substituted (28.7.2000 with effect in relation to transactions entered into, or series of transactions begun, on or after 1.4.2000) by 2000 c. 17, s. 102, Sch. 29 Pt. II para. 44(4)(5)

Modifications etc. (not altering text)

C1 Sch. 9 para. 12 modified (retrospective to 1.4.1996) by S.I. 1997/473, reg. 52

C2 Sch. 9 para. 12(2) applied (27.7.1999 with effect as mentioned in s. 81(12) of the amending Act) by 1999 c. 16, s. 81(9)

Marginal Citations

M1 1982 c. 50