Finance Act 2002

[F1 Transfer of UK business between companies resident in different EU member States] U.K.

85 [F2 (1) This paragraph applies where—

(a) an EU company resident in one member State (“the transferor”) transfers the whole or part of the business carried on by it in the United Kingdom to an EU company resident in another member State (“the transferee”),

(b) the transfer is wholly in exchange for securities issued by the transferee to the transferor, and

(c) a claim is made under this paragraph by the transferor and the transferee.

(1A) This paragraph also applies where an EU company transfers part of its business to one or more EU companies if—

(a) the transferor is resident in one member State,

(b) the part of the transferor's business which is to be transferred is carried on by the transferor in the United Kingdom,

(c) at least one transferee is resident in a member State other than that in which the transferor is resident,

(d) the transferor continues to carry on a business after the transfer,

(e) a claim is made under this paragraph by the transferor and the transferee (or each of the transferees), and

(f) either of the following conditions is satisfied.

(1B) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor.

(1C) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself.

F3 (1D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(2) If the transfer includes intangible fixed assets that are chargeable intangible assets in relation to the transferor immediately before the transfer and in relation to the transferee immediately after the transfer, the transfer of those assets is treated for the purposes of this Schedule as tax-neutral (see paragraph 140).

(3) For the purposes of this paragraph a company is regarded as resident in a member State if it is within a charge to tax under the law of the State because it is regarded as resident for the purposes of the charge.

For this purpose a company is treated as not within a charge to tax under the law of a member State if it falls to be regarded for the purposes of any double taxation relief arrangements to which the State is a party as resident in a territory which is not within any of the member States.

(4) This paragraph applies only if the transfer of the [F4 business] or part—

(a) is effected for bona fide 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 corporation tax, capital gains tax or income tax.

(5) The requirements of sub-paragraph (4) are treated as met where, before the transfer, the Inland Revenue have, on the application of the transferor and the transferee [F5 (or each of the transferees)] , notified those companies that they are satisfied that the requirements of that sub-paragraph will be met.

For the procedure on such an application, see paragraph 88.

(6) In this paragraph—

(a) “EU company” means a body incorporated under the law of a member State; and

(b) “securities” includes shares.

Textual Amendments

F1 Sch. 29 para. 85 heading substituted (with effect in accordance with reg. 3(1) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 1 para. 21(5)

F2 Sch. 29 para. 85(1)-(1D) substituted for Sch. 29 para. 85(1) (with effect in accordance with reg. 3(1) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 1 para. 21(2)

F3 Sch. 29 para. 85(1D) omitted (with effect in accordance with reg. 3 of the amending S.I.) by virtue of The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), Sch. 3 para. 11

F4 Word in Sch. 29 para. 85(4) substituted (with effect in accordance with reg. 3(1) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 1 para. 21(3)

F5 Words in Sch. 29 para. 85(5) inserted (with effect in accordance with reg. 3(1) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 1 para. 21(4)

Modifications etc. (not altering text)

C1 Sch. 29 para. 85 modification to earlier affecting provision S.I. 2007/3186, reg. 3(1) (8.7.2008) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), regs. 1(2), 4(1)

C2 Sch. 29 para. 85(1)-(1D) modification to earlier affecting provision S.I. 2007/3186, reg. 3(1) (8.7.2008) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), regs. 1(2), 4(1)

C3 Sch. 29 para. 85(1C) modified (temp.) (8.7.2008) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), regs. 1(2), 6(1), Sch. 4 para. 4(e) (with reg. 6(2))

C4 Sch. 29 para. 85(4) modification to earlier affecting provision S.I. 2007/3186, reg. 3(1) (8.7.2008) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), regs. 1(2), 4(1)

C5 Sch. 29 para. 85(5) modification to earlier affecting provision S.I. 2007/3186, reg. 3(1) (8.7.2008) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), regs. 1(2), 4(1)