Finance Act 2003

Section 62

SCHEDULE 7 U.K. Stamp duty land tax: group relief and reconstruction and acquisition reliefs

Part 1 U.K. Group relief

Group relief U.K.

1 (1) A transaction is exempt from charge if the vendor and purchaser are companies that at the effective date of the transaction are members of the same group. U.K.

(2) For the purposes of group relief—

(a) “company” means a body corporate, and

(b) companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company.

(3) For the purposes of group relief a company (“company A”) is the 75% subsidiary of another company (“company B”) if company B—

(a) is beneficial owner of not less than 75% of the ordinary share capital of company A,

(b) is beneficially entitled to not less than 75% of any profits available for distribution to equity holders of company A, and

(c) would be beneficially entitled to not less than 75% of any assets of company A available for distribution to its equity holders on a winding-up.

(4) The ownership referred to in sub-paragraph (3)(a) is ownership either directly or through another company or companies.

For the purposes of that provision the amount of ordinary share capital of company A owned by company B through another company or companies shall be determined in accordance with [F1 sections 1155 to 1157 of the Corporation Tax Act 2010].

(5) In sub-paragraphs (3)(a) and (4) above “ordinary share capital”, in relation to a company, means all the issued share capital (by whatever name called) of the company, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company.

[F2 (6) Chapter 6 of Part 5 of the Corporation Tax Act 2010 (group relief: equity holders and profits or assets available for distribution) applies for the purposes of sub-paragraphs (3)(b) and (c) above as it applies for the purposes of section 151(4)(a) and (b) of that Act.

(6A) In that Chapter as it applies for the purposes of sub-paragraphs (3)(b) and (c) above, sections 171(1)(b) and (3), 173, 174 and 176 to 178 of that Act are to be treated as omitted.]

(7) This paragraph is subject to paragraph 2 (restrictions on availability of group relief) and [F3 paragraphs 3 and 4A] (withdrawal of group relief).

Textual Amendments

F1 Words in Sch. 7 para. 1(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(2)(a) (with Sch. 2)

F2 Sch. 7 para. 1(6)(6A) substituted for Sch. 7 para. 1(6) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(2)(b) (with Sch. 2)

F3 Words in Sch. 7 para. 1(7) substituted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 3

Modifications etc. (not altering text)

C1 Sch. 7 para. 1 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 43(2)

Restrictions on availability of group relief U.K.

2 (1) Group relief is not available if at the effective date of the transaction there are arrangements in existence by virtue of which, at that or some later time, a person has or could obtain, or any persons together have or could obtain, control of the purchaser but not of the vendor. U.K.

This does not apply to arrangements entered into with a view to an acquisition of shares by a company (“the acquiring company”)—

(a) in relation to which section 75 of the Finance Act 1986 (c. 41) (stamp duty: acquisition relief) will apply,

(b) in relation to which the conditions for relief under that section will be met, and

(c) as a result of which the purchaser will be a member of the same group as the acquiring company.

[F4 For other exceptions to this, see sub-paragraph (3A) and paragraphs 2A and 2B.]

(2) Group relief is not available if the transaction is effected in pursuance of, or in connection with, arrangements under which—

(a) the consideration, or any part of the consideration, for the transaction is to be provided or received (directly or indirectly) by a person other than a group company, or

(b) the vendor and the purchaser are to cease to be members of the same group by reason of the purchaser ceasing to be a 75% subsidiary of the vendor or a third company.

(3) Arrangements are within sub-paragraph (2)(a) if under them the vendor or the purchaser, or another group company, is to be enabled to provide any of the consideration, or is to part with any of it, by or in consequence of the carrying out of a transaction or transactions involving, or any of them involving, a payment or other disposition by a person other than a group company.

[F5 (3A) Sub-paragraphs (1) and (2)(b) do not apply to arrangements in so far as they are for the purpose of facilitating a transfer of the whole or part of the business of a company to another company in relation to which—

(a) section 96 of the Finance Act 1997 is intended to apply (stamp duty relief: demutualisation of insurance companies), and

(b) the conditions for relief under that section are intended to be met.]

(4) In sub-paragraphs (2)(a) and (3) a “group company” means a company that at the effective date of the transaction is a member of the same group as the vendor or the purchaser.

[F6 (4A) Group relief is not available if the transaction—

(a) is not effected for bona fide commercial reasons, or

(b) forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of liability to tax.

“Tax” here means stamp duty, income tax, corporation tax, capital gains tax or tax under this Part.]

(5) In this paragraph—

• “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable; and

• “control” has the meaning given by [F7 section 1124 of the Corporation Tax Act 2010].

Textual Amendments

F4 Words in Sch. 7 para. 2(1) substituted (1.3.2013) by The Enactment of Extra-Statutory Concessions Order 2013 (S.I. 2013/234), arts. 1, 8 (with art. 9)

F5 Sch. 7 para. 2(3A) inserted (with effect in accordance with s. 167(5) of the amending Act) by Finance Act 2006 (c. 25), s. 167(3)

F6 Sch. 7 para. 2(4A) inserted (with effect in accordance with Sch. 10 para. 22(1)-(3)(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 19

F7 Words in Sch. 7 para. 2(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(3) (with Sch. 2)

Modifications etc. (not altering text)

C2 Sch. 7 para. 2 modified (25.2.2011) by Horserace Betting and Olympic Lottery Act 2004 (c. 25), ss. 4(3)(c), 40; S.I. 2011/462, art. 2

[F8 Certain arrangements not within paragraph 2 U.K.

Textual Amendments

F8 Sch. 7 paras. 2A, 2B inserted (1.3.2013) by The Enactment of Extra-Statutory Concessions Order 2013 (S.I. 2013/234), arts. 1, 7 (with art. 9)

2A (1) Arrangements entered into by a joint venture company which, apart from this section, would be arrangements to which paragraph 2 applies are not to be treated as such arrangements if and so long as— U.K.

(a) the arrangements fall within sub-paragraph (2), and

(b) none of the contingencies mentioned in sub-paragraph (3) to which the arrangements relate has occurred.

(2) Arrangements fall within this sub-paragraph if they are—

(a) an agreement which provides for the transfer of shares or securities in the joint venture company to one or more members of that company on, or as a result of, one or more contingencies mentioned in sub-paragraph (3) occurring, or

(b) a provision in a constitutional document of the joint venture company which provides for the suspension of a member’s voting rights on, or as a result of, one or more of those contingencies occurring.

(3) The contingencies referred to in sub-paragraph (1)(b) and (2) are—

(a) the voluntary departure of a member,

(b) the commencement of the liquidation, administration, administrative receivership or receivership of, or the entering into of a voluntary arrangement by, a member under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 or the commencement, or entering into, of equivalent proceedings or arrangements under the law of any country or territory outside the United Kingdom,

(c) a serious deterioration in the financial condition of a member,

(d) a change of control of a member,

(e) a default by a member in performing its obligations under any agreement between the members or with the joint venture company (which, for this purpose, includes any constitutional document of the joint venture company),

(f) an external change in the commercial circumstances in which the joint venture company operates such that its viability is threatened,

(g) an unresolved disagreement between the members, and

(h) any contingency of a similar kind to that mentioned in any of paragraphs (a) to (g) which is provided for, but not intended to happen, when the options arrangements in question were entered into.

(4) This paragraph does not apply if a member could alone or together with connected persons dictate the terms or timing of—

(a) the transfer of shares or securities, or

(b) the suspension of a member’s voting rights,

in advance of one or more of the contingencies occurring.

(5) For the purposes of sub-paragraph (4) members are not connected with each other by reason only of their membership of the joint venture company.

(6) In this paragraph—

• “connected” has the same meaning as in section 1122 of the Corporation Tax Act 2010;

• “constitutional document” means a memorandum of association, articles of association or any other similar document regulating the affairs of the joint venture company;

• “joint venture company” means a company which—

  (a)

  has two or more member companies, and

  (b)

  carries on a commercial activity governed by an agreement regulating the affairs of its members;

• “member” means a holder of shares or securities in the joint venture company.

Certain mortgage arrangements not within paragraph 2 U.K.

2B (1) Arrangements entered into by a company which, apart from this paragraph, would be arrangements to which paragraph 2 applies are not to be treated as such arrangements if and so long as— U.K.

(a) the arrangements are a mortgage, secured by way of shares or securities in the company, which on default or the happening of any other event allows the mortgagee to exercise its rights against the mortgagor, and

(b) the mortgagee has not exercised its rights against the mortgagor.

(2) This paragraph does not apply if the mortgagee—

(a) possesses greater rights in respect of the shares or securities which are the subject of the mortgage than it requires to protect its interest as mortgagee, or

(b) could alone or together with connected persons dictate the terms or timing of the default or the happening of any event which allows it to exercise its rights against the mortgagor.

(3) For the purposes of sub-paragraph (2)(b) a mortgagee is not, by reason only of the mortgage, connected with a company whose shares or securities are the subject of the mortgage.

(4) In this paragraph—

• “connected” has the same meaning as in section 1122 of the Corporation Tax Act 2010;

• “mortgage” means—

  (a)

  in England F9 ... , and Northern Ireland, any legal or equitable charge, and

  (b)

  in Scotland, any right in security.]

Textual Amendments

F9 Words in Sch. 7 para. 2B(4) omitted (1.4.2018 with effect in accordance with s. 16(4)(5) of the amending Act) by virtue of Wales Act 2014 (c. 29), s. 29(2)(b)(3), Sch. 2 para. 10; S.I. 2018/214, art. 2(a)

Withdrawal of group relief U.K.

3 (1) Where in the case of a transaction (“the relevant transaction”) that is exempt from charge by virtue of paragraph 1 (group relief)— U.K.

(a) the purchaser ceases to be a member of the same group as the vendor—

(i) before the end of the period of three years beginning with the effective date of the transaction, or

(ii) in pursuance of, or in connection with, arrangements made before the end of that period,

and

(b) at the time the purchaser ceases to be a member of the same group as the vendor (“the relevant time”), it or a relevant associated company holds a chargeable interest—

(i) that was acquired by the purchaser under the relevant transaction, or

(ii) that is derived from a chargeable interest so acquired,

and that has not subsequently been acquired at market value under a chargeable transaction for which group relief was available but was not claimed,

group relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn and tax is chargeable in accordance with this paragraph.

[F10 (2) The amount chargeable is the tax that would have been chargeable in respect of the relevant transaction but for group relief if the chargeable consideration for that transaction had been an amount equal to—

(a) the market value of the subject-matter of the transaction, and

(b) if the acquisition was the grant of a lease at a rent, that rent,

or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.]

(3) In sub-paragraphs (1) and (2) “an appropriate proportion” means an appropriate proportion having regard to the subject matter of the relevant transaction and what is held at the relevant time by the transferee company or, as the case may be, by that company and its relevant associated companies.

(4) In this paragraph—

• “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable; and

• “relevant associated company”, in relation to the purchaser, means a company that—

  (a)

  is a member of the same group as the purchaser immediately before the purchaser ceases to be a member of the same group as the vendor, and

  (b)

  ceases to be a member of the same group as the vendor in consequence of the purchaser so ceasing.

(5) This paragraph has effect subject to [F11 paragraphs 4 and 4ZA] (cases in which group relief not withdrawn) [F12 and paragraph 4A (withdrawal of group relief in certain cases involving successive transactions)].

Textual Amendments

F10 Sch. 7 para. 3(2) substituted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 4(a)

F11 Words in Sch. 7 para. 3(5) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(2)

F12 Words in Sch. 7 para. 3(5) inserted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 4(b)

Modifications etc. (not altering text)

C3 Sch. 7 para. 3 excluded (with effect in accordance with reg. 1(2) of the amending S.I.) by The Mutual Societies (Transfers of Business) (Tax) Regulations 2009 (S.I. 2009/2971), regs. 1(1), 33(1)

C4 Sch. 7 para. 3(1) modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 43(3)

Cases in which group relief not withdrawn U.K.

4 (1) Group relief is not withdrawn under paragraph 3 in the following cases. U.K.

F13 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F14 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The second case is where the purchaser ceases to be a member of the same group as the vendor by reason of anything done for the purposes of, or in the course of, winding up the vendor or another company that is above the vendor in the group structure.

(5) For [F15 the purposes of [F16 sub-paragraph (4)]] a company is “above” the vendor in the group structure if the vendor, or another company that is above the vendor in the group structure, is a 75% subsidiary of the company.

(6) The third case is where—

(a) the purchaser ceases to be a member of the same group as the vendor as a result of an acquisition of shares by another company (“the acquiring company”) in relation to which—

(i) section 75 of the Finance Act 1986 (c. 41) applies (stamp duty: acquisition relief), and

(ii) the conditions for relief under that section are met,

and

(b) the purchaser is immediately after that acquisition a member of the same group as the acquiring company.

[F17 (6A) The fourth case is where—

(a) the purchaser ceases to be a member of the same group as the vendor as a result of the transfer of the whole or part of the vendor's business to another company (“the acquiring company”) in relation to which—

(i) section 96 of the Finance Act 1997 applies (stamp duty relief: demutualisation of insurance companies), and

(ii) the conditions for relief under that section are met, and

(b) the purchaser is immediately after that transfer a member of the same group as the acquiring company.]

(7) But if in a case within sub-paragraph (6) [F18 or (6A)] —

(a) the purchaser ceases to be a member of the same group as the acquiring company—

(i) before the end of the period of three years beginning with the effective date of the relevant transaction, or

(ii) in pursuance of, or in connection with, arrangements made before the end of that period,

and

(b) at the time the purchaser ceases to be a member of the same group as the acquiring company, it or a relevant associated company holds a chargeable interest—

(i) that was acquired by the purchaser under the relevant transaction, or

(ii) that is derived from an interest so acquired,

and that has not subsequently been acquired at market value under a chargeable transaction for which group relief was available but was not claimed,

the provisions of this Part relating to group relief apply as if the purchaser had then ceased to be a member of the same group as the vendor.

(8) In sub-paragraph (7)—

• “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable; and

• “relevant associated company”, in relation to the purchaser, means a company that is a member of the same group as the purchaser that ceases to be a member of the same group as the acquiring company in consequence of the purchaser so ceasing.

Textual Amendments

F13 Sch. 7 para. 4(2) omitted (with effect in accordance with s. 96(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 96(3)(a)

F14 Sch. 7 para. 4(3) omitted (with effect in accordance with s. 96(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 96(3)(a)

F15 Words in Sch. 7 para. 4(5) substituted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 5(b)

F16 Words in Sch. 7 para. 4(5) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(3)(b)

F17 Sch. 7 para. 4(6A) inserted (with effect in accordance with s. 167(5) of the amending Act) by Finance Act 2006 (c. 25), s. 167(4)(a)

F18 Words in Sch. 7 para. 4(7) inserted (with effect in accordance with s. 167(5) of the amending Act) by Finance Act 2006 (c. 25), s. 167(4)(b)

[F19 Group relief not withdrawn where vendor leaves group U.K.

Textual Amendments

F19 Sch. 7 para. 4ZA and cross-heading inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(4)

4ZA (1) Group relief is not withdrawn under paragraph 3 where the purchaser ceases to be a member of the same group as the vendor because the vendor leaves the group. U.K.

(2) The vendor is regarded as leaving the group if the companies cease to be members of the same group by reason of a transaction relating to shares in—

(a) the vendor, or

(b) another company that—

(i) is above the vendor in the group structure, and

(ii) as a result of the transaction ceases to be a member of the same group as the purchaser.

(3) For the purpose of sub-paragraph (2) a company is “above” the vendor in the group structure if the vendor, or another company that is above the vendor in the group structure, is a 75% subsidiary of the company.

(4) But if there is a change in the control of the purchaser after the vendor leaves the group, paragraphs 3, 4(6) and (7), 5 and 6 have effect as if the purchaser had then ceased to be a member of the same group as the vendor (but see sub-paragraph (7)).

(5) For the purposes of this paragraph there is a change in the control of the purchaser if—

(a) a person who controls the purchaser (alone or with others) ceases to do so,

(b) a person obtains control of the purchaser (alone or with others), or

(c) the purchaser is wound up.

(6) For the purposes of sub-paragraph (5) a person does not control, or obtain control of, the purchaser if that person is under the control of another person or other persons.

(7) Sub-paragraph (4) does not apply where—

(a) there is a change in the control of the purchaser because a loan creditor (within the meaning [F20 given by section 453 of the Corporation Tax Act 2010]) obtains control of, or ceases to control, the purchaser, and

(b) the other persons who controlled the purchaser before that change continue to do so.

(8) In this paragraph references to “control” shall be interpreted in accordance with [F21 sections 450 and 451 of the Corporation Tax Act 2010] (subject to sub-paragraph (6)).]

Textual Amendments

F20 Words in Sch. 7 para. 4ZA(7)(a) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(4)(a) (with Sch. 2)

F21 Words in Sch. 7 para. 4ZA(8) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(4)(b) (with Sch. 2)

[F22 Withdrawal of group relief in certain cases involving successive transactions U.K.

Textual Amendments

F22 Sch. 7 para. 4A and cross-heading inserted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 6

4A (1) Where, in the case of a transaction (“the relevant transaction”) that is exempt from charge by virtue of paragraph 1 (group relief)— U.K.

(a) there is a change in the control of the purchaser,

(b) that change occurs—

(i) before the end of the period of three years beginning with the effective date of the relevant transaction, or

(ii) in pursuance of, or in connection with, arrangements made before the end of that period,

(c) apart from this paragraph, group relief in relation to the relevant transaction would not be withdrawn under paragraph 3, and

(d) any previous transaction falls within sub-paragraph (2),

paragraphs 3[F23 , 4 and 4ZA] have effect in relation to the relevant transaction as if the vendor in relation to the earliest previous transaction falling within sub-paragraph (2) were the vendor in relation to the relevant transaction.

[F24 (1A) Sub-paragraph (1) has effect subject to sub-paragraph (3A).]

(2) A previous transaction falls within this sub-paragraph if—

(a) the previous transaction is exempt from charge by virtue of paragraph 1, 7 or 8,

(b) the effective date of the previous transaction is less than three years before the date of the event falling within sub-paragraph (1)(a),

(c) the chargeable interest acquired under the relevant transaction by the purchaser in relation to that transaction is the same as, comprises, forms part of, or is derived from, the chargeable interest acquired under the previous transaction by the purchaser in relation to the previous transaction, and

(d) since the previous transaction, the chargeable interest acquired under that transaction has not been acquired by any person under a transaction that is not exempt from charge by virtue of paragraph 1, 7 or 8.

(3) For the purposes of [F25 this paragraph] there is a change in the control of a company if—

(a) any person who controls the company (alone or with others) ceases to do so,

(b) a person obtains control of the company (alone or with others), or

(c) the company is wound up.

References to “control” in [F26 this paragraph] shall be construed in accordance with [F27 sections 450 and 451 of the Corporation Tax Act 2010].

[F28 (3A) Sub-paragraph (1) does not apply where—

(a) there is a change in the control of the purchaser because a loan creditor (within the meaning [F29 given by section 453 of the Corporation Tax Act 2010]) obtains control of, or ceases to control, the purchaser, and

(b) the other persons who controlled the purchaser before that change continue to do so.]

(4) If two or more transactions effected at the same time are the earliest previous transactions falling within sub-paragraph (2), the reference in sub-paragraph (1) to the vendor in relation to the earliest previous transaction is a reference to the persons who are the vendors in relation to the earliest previous transactions.

(5) In this paragraph “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.]

Textual Amendments

F23 Words in Sch. 7 para. 4A(1) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(a)

F24 Sch. 7 para. 4A(1A) inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(b)

F25 Words in Sch. 7 para. 4A(3) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(c)(i)

F26 Words in Sch. 7 para. 4A(3) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(c)(ii)

F27 Words in Sch. 7 para. 4A(3) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(5)(a) (with Sch. 2)

F28 Sch. 7 para. 4A(3A) inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(d)

F29 Words in Sch. 7 para. 4A(3A)(a) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(5)(b) (with Sch. 2)

Recovery of group relief from another group company or controlling director U.K.

5 (1) This paragraph applies where— U.K.

(a) tax is chargeable under paragraph 3 (withdrawal of group relief),

(b) the amount so chargeable has been finally determined, and

(c) the whole or part of the amount so chargeable is unpaid six months after the date on which it became payable.

(2) The following persons may, by notice under paragraph 6, be required to pay the unpaid tax—

(a) the vendor;

(b) any company that at any relevant time was a member of the same group as the purchaser and was above it in the group structure;

(c) any person who at any relevant time was a controlling director of the purchaser or a company having control of the purchaser.

(3) For the purposes of sub-paragraph (2)(b)—

(a) a “relevant time” means any time between the effective date of the relevant transaction and the purchaser ceasing to be a member of the same group as the vendor; and

(b) a company (“company A”) is “above” another company (“company B”) in a group structure if company B, or another company that is above company B in the group structure, is a 75% subsidiary of company A.

(4) In sub-paragraph (2)(c)—

• “director”, in relation to a company, has the meaning given by section 67(1) of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (read with subsection (2) of that section) and includes any person falling within [F30 section 452(1) of the Corporation Tax Act 2010]; and

• “controlling director”, in relation to a company, means a director of the company who has control of it (construing control in accordance with [F31 sections 450 and 451 of the Corporation Tax Act 2010]).

Textual Amendments

F30 Words in Sch. 7 para. 5(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), Sch. 1 para. 416(6)(a) (with Sch. 2)

F31 Words in Sch. 7 para. 5(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), Sch. 1 para. 416(6)(b) (with Sch. 2)

Recovery of group relief: supplementary U.K.

6 (1) The Inland Revenue may serve a notice on a person within paragraph 5(2) above requiring him within 30 days of the service of the notice to pay the amount that remains unpaid. U.K.

(2) Any such notice must be served before the end of the period of three years beginning with the date of the final determination mentioned in paragraph 5(1)(b).

(3) The notice must state the amount required to be paid by the person on whom the notice is served.

(4) The notice has effect—

(a) for the purposes of the recovery from that person of the amount required to be paid and of interest on that amount, and

(b) for the purposes of appeals,

as if it were a notice of assessment and that amount were an amount of tax due from that person.

(5) A person who has paid an amount in pursuance of a notice under this paragraph may recover that amount from the purchaser.

(6) A payment in pursuance of a notice under this paragraph is not allowed as a deduction in computing any income, profits or losses for any tax purpose.

Part 2 U.K. Reconstruction and acquisition reliefs

Reconstruction relief U.K.

7 (1) Where— U.K.

(a) a company (“the acquiring company”) acquires the whole or part of the undertaking of another company (“the target company”) in pursuance of a scheme for the reconstruction of the target company, and

(b) the first, second and third conditions specified below are met,

a land transaction entered into for the purposes of or in connection with the transfer of the undertaking or part is exempt from charge.

Relief under this paragraph is referred to in this Part as “reconstruction relief”.

(2) The first condition is that the consideration for the acquisition consists wholly or partly of the issue of non-redeemable shares in the acquiring company to all the shareholders of the target company.

• “Non-redeemable shares” means shares that are not redeemable shares.

(3) Where the consideration for the acquisition consists partly of the issue of non-redeemable shares as mentioned in the first condition, that condition is met only if the rest of the consideration consists wholly of the assumption or discharge by the acquiring company of liabilities of the target company.

(4) The second condition is that after the acquisition has been made—

(a) each shareholder of each of the companies is a shareholder of the other, and

(b) the proportion of shares of one of the companies held by any shareholder is the same, or as nearly as may be the same, as the proportion of shares of the other company held by that shareholder.

(5) The third condition is that the acquisition is effected for bona fide commercial reasons and does not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, is the avoidance of liability to tax.

• “Tax” here means stamp duty, income tax, corporation tax, capital gains tax or tax under this Part.

[F32 (5A) If immediately before the acquisition the target company or the acquiring company holds any of its own shares, the shares are to be treated for the purposes of sub-paragraphs (2) and (4) as having been cancelled before the acquisition (and, accordingly, the company is to be treated as if it were not a shareholder of itself).]

(6) This paragraph is subject to paragraph 9 (withdrawal of reconstruction or acquisition relief).

Textual Amendments

F32 Sch. 7 para. 7(5A) inserted (with effect in accordance with s. 74(5) of the amending Act) by Finance Act 2007 (c. 11), s. 74(3)

Acquisition relief U.K.

8 (1) Where— U.K.

(a) a company (“the acquiring company”) acquires the whole or part of the undertaking of another company (“the target company”), and

(b) [F33 all the conditions] specified below are met,

the [F34 amount] of tax chargeable on a land transaction entered into for the purposes of or in connection with the transfer of the undertaking or part is limited to [F35 an amount equal to 0.5% of the chargeable consideration for the transaction].

Relief under this paragraph is referred to in this Part as “acquisition relief”.

(2) The first condition is that the consideration for the acquisition consists wholly or partly of the issue of non-redeemable shares in the acquiring company to—

(a) the target company, or

(b) all or any of the target company’s shareholders.

• “Non-redeemable shares” means shares that are not redeemable shares.

(3) Where the consideration for the acquisition consists partly of the issue of non-redeemable shares as mentioned in the first condition, that condition is met only if the rest of the consideration consists wholly of—

(a) cash not exceeding 10% of the nominal value of the non-redeemable shares so issued, or

(b) the assumption or discharge by the acquiring company of liabilities of the target company, or

(c) both of those things.

(4) The second condition is that the acquiring company is not associated with another company that is a party to arrangements with the target company relating to shares of the acquiring company issued in connection with the transfer of the undertaking or part.

[F36 (5) For this purpose companies are associated if one has control of the other or both are controlled by the same person or persons.

The reference to control shall be construed in accordance with section 416 of the Taxes Act 1988.]

[F37 (5A) The third condition is that the undertaking or part acquired by the acquiring company has as its main activity the carrying on of a trade that does not consist wholly or mainly of dealing in chargeable interests.

In this sub-paragraph “trade” has the same meaning as in the Taxes Act 1988.]

[F38 (5B) The fourth condition is that the acquisition is effected for bona fide commercial reasons and does not form part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of liability to tax.

“Tax” here means stamp duty, income tax, corporation tax, capital gains tax or tax under this Part.

(5C) In this paragraph “arrangements” include any scheme, agreement or understanding, whether or not legally enforceable.]

(6) This paragraph is subject to paragraph 9 (withdrawal of reconstruction or acquisition relief).

Textual Amendments

F33 Words in Sch. 7 para. 8(1)(b) substituted (with effect in accordance with Sch. 10 para. 16(5)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 8(a)

F34 Word in Sch. 7 para. 8(1) substituted (with effect in accordance with s. 2(2) of the amending Act) by Stamp Duty Land Tax Act 2015 (c. 1), Sch. para. 8(a) (with s. 2(3)-(6))

F35 Words in Sch. 7 para. 8(1) substituted (with effect in accordance with s. 2(2) of the amending Act) by Stamp Duty Land Tax Act 2015 (c. 1), Sch. para. 8(b) (with s. 2(3)-(6))

F36 Sch. 7 para. 8(5) substituted (with effect in accordance with Sch. 10 para. 22(1)-(3)(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 20(a)

F37 Sch. 7 para. 8(5A) inserted (with effect in accordance with Sch. 10 para. 16(5)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 8(b)

F38 Sch. 7 para. 8(5B)(5C) inserted (with effect in accordance with Sch. 10 para. 22(1)-(3)(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 20(b)

Withdrawal of reconstruction or acquisition relief U.K.

9 (1) Where in the case of a transaction (“the relevant transaction”) that is exempt by virtue of reconstruction relief or is subject to a reduced rate of tax by virtue of acquisition relief— U.K.

(a) control of the acquiring company changes—

(i) before the end of the period of three years beginning with the effective date of the transaction, or

(ii) in pursuance of, or in connection with, arrangements made before the end of that period,

and

(b) at the time control of the acquiring company changes (“the relevant time”), it or a relevant associated company holds a chargeable interest—

(i) that was acquired by the acquiring company under the relevant transaction, or

(ii) that is derived from an interest so acquired,

and that has not subsequently been acquired at market value under a chargeable transaction in relation to which reconstruction or acquisition relief was available but was not claimed,

reconstruction or acquisition relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn and tax is chargeable in accordance with this paragraph.

[F39 (2) The amount chargeable is the tax that would have been chargeable in respect of the relevant transaction but for reconstruction or acquisition relief if the chargeable consideration for that transaction had been an amount equal to—

(a) the market value of the subject-matter of the transaction, and

(b) if the acquisition was the grant of a lease at a rent, that rent,

or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.]

(3) In sub-paragraphs (1) and (2) “an appropriate proportion” means an appropriate proportion having regard to the subject-matter of the relevant transaction and what is held at the relevant time by the acquiring company or, as the case may be, by that company and any relevant associated companies.

(4) In this paragraph “relevant associated company”, in relation to the acquiring company, means a company—

(a) that is controlled by the acquiring company immediately before the control of that company changes, and

(b) of which control changes in consequence of the change of control of that company.

(5) In this paragraph—

(a) “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable;

(b) “control” shall be construed in accordance with [F40 sections 450 and 451 of the Corporation Tax Act 2010]; and

(c) references to control of a company changing are to the company becoming controlled—

(i) by a different person,

(ii) by a different number of persons, or

(iii) by two or more persons at least one of whom is not the person, or one of the persons, by whom the company was previously controlled.

(6) This paragraph has effect subject to paragraph 10 (cases in which reconstruction or acquisition relief not withdrawn).

Textual Amendments

F39 Sch. 7 para. 9(2) substituted (with effect in accordance with Sch. 10 para. 16(2)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 9

F40 Words in Sch. 7 para. 9(5)(b) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(7) (with Sch. 2)

Cases in which reconstruction or acquisition relief not withdrawn U.K.

10 (1) Reconstruction or acquisition relief is not withdrawn under paragraph 9 in the following cases. U.K.

(2) The first case is where control of the acquiring company changes as a result of a share transaction that is effected as mentioned in any of paragraphs (a) to (d) of paragraph 3 of Schedule 3 (transactions in connection with divorce etc).

(3) The second case is where control of the acquiring company changes as a result of a share transaction that—

(a) is effected as mentioned in paragraph 4(1) of Schedule 3, and

(b) meets the conditions in paragraph 4(2) of that Schedule (variation of testamentary dispositions etc).

(4) The third case is where control of the acquiring company changes as a result of an exempt intra-group transfer.

An “exempt intra-group transfer” means a transfer of shares effected by an instrument that is exempt from stamp duty by virtue of section 42 of the Finance Act 1930 (c. 28) or section 11 of the Finance Act (Northern Ireland) 1954 (c. 23 (N. I.)) (transfers between associated bodies corporate).

But see paragraph 11 (withdrawal of relief in case of subsequent non-exempt transfer).

(5) The fourth case is where control of the acquiring company changes as a result of a transfer of shares to another company in relation to which share acquisition relief applies.

• “Share acquisition relief” means relief under section 77 of the Finance Act 1986 (c. 41) and a transfer is one in relation to which that relief applies if an instrument effecting the transfer is exempt from stamp duty by virtue of that provision. But see paragraph 11 (withdrawal in case of subsequent non-exempt transfer).

(6) The fifth case is where—

(a) control of the acquiring company changes as a result of a loan creditor becoming, or ceasing to be, treated as having control of the company, and

(b) the other persons who were previously treated as controlling the company continue to be so treated.

“Loan creditor” here has the meaning given by [F41 section 453 of the Corporation Tax Act 2010].

Textual Amendments

F41 Words in Sch. 7 para. 10(6) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(8) (with Sch. 2)

Withdrawal of reconstruction or acquisition relief on subsequent non-exempt transfer U.K.

11 (1) Where paragraph 10(4) (change of control of acquiring company as a result of exempt intra-group transfer) has effect to prevent the withdrawal of reconstruction or acquisition relief on a change of control of the acquiring company, but— U.K.

(a) a company holding shares in the acquiring company to which the exempt intra-group transfer related, or that are derived from shares to which that transfer related, ceases to be a member of the same group as the target company—

(i) before the end of the period of three years beginning with the effective date of the relevant transaction, or

(ii) in pursuance of or in connection with arrangements made before the end of that period,

and

(b) the acquiring company or a relevant associated company, at that time (“the relevant time”), holds a chargeable interest—

(i) that was transferred to the acquiring company by the relevant transaction, or

(ii) that is derived from an interest that was so transferred,

and that has not subsequently been transferred at market value by a chargeable transaction in relation to which reconstruction or acquisition relief was available but was not claimed,

reconstruction or acquisition relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn and tax is chargeable in accordance with this paragraph.

(2) Where paragraph 10(5) (change of control of acquiring company as a result of a transfer to which share acquisition relief applies) has effect to prevent the withdrawal of reconstruction or acquisition relief on a change of control of the acquiring company, but—

(a) control of the other company mentioned in that provision changes—

(i) before the end of the period of three years beginning with the effective date of the relevant transaction, or

(ii) in pursuance of or in connection with arrangements made before the end of that period,

at a time when that company holds any shares transferred to it by the exempt transfer, or any shares derived from shares so transferred,

and

(b) the acquiring company or a relevant associated company, at that time (“the relevant time”), holds a chargeable interest—

(i) that was transferred to the acquiring company by the relevant transaction, or

(ii) that is derived from an interest that was so transferred,

and that has not subsequently been transferred at market value by a chargeable transaction in relation to which reconstruction or acquisition relief was available but was not claimed,

reconstruction or acquisition relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn and tax is chargeable in accordance with this paragraph.

(3) The amount chargeable is the tax that would have been chargeable in respect of the relevant transaction but for reconstruction or acquisition relief if the chargeable consideration for that transaction had been an amount equal to the market value of the subject matter of the transaction or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.

(4) In sub-paragraphs (1), (2) and (3) “an appropriate proportion” means an appropriate proportion having regard to the subject-matter of the relevant transaction and what is held at the relevant time by the acquiring company or, as the case may be, by that company and any relevant associated companies.

(5) In this paragraph “relevant associated company”, in relation to the acquiring company, means a company—

(a) that is controlled by the acquiring company immediately before the control of that company changes, and

(b) of which control changes in consequence of the change of control of that company.

(6) In this paragraph—

(a) “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable;

(b) “control” shall be construed in accordance with [F42 sections 450 and 451 of the Corporation Tax Act 2010]; and

(c) references to control of a company changing are to the company becoming controlled—

(i) by a different person,

(ii) by a different number of persons, or

(iii) by two or more persons at least one of whom is not the person, or one of the persons, by whom the company was previously controlled.

Textual Amendments

F42 Words in Sch. 7 para. 11(6)(b) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 416(9) (with Sch. 2)

Recovery of reconstruction or acquisition relief from another group company or controlling director U.K.

12 (1) This paragraph applies where— U.K.

(a) tax is chargeable under paragraph 9 or 11 (withdrawal of reconstruction or acquisition relief),

(b) the amount so chargeable has been finally determined, and

(c) the whole or part of the amount so chargeable is unpaid six months after the date on which it became payable.

(2) The following persons may, by notice under paragraph 13, be required to pay the unpaid tax—

(a) any company that at any relevant time was a member of the same group as the acquiring company and was above it in the group structure;

(b) any person who at any relevant time was a controlling director of the acquiring company or a company having control of the acquiring company.

(3) For the purposes of sub-paragraph (2) “relevant time” means any time between effective date of the relevant transaction and the change of control by virtue of which tax is chargeable.

(4) For the purposes of sub-paragraph (2)(a) a company (“company A”) is “above” another company (“company B”) in a group structure if company B, or another company that is above company B in the group structure, is a 75% subsidiary of company A.

(5) For the purposes of sub-paragraph (2)(b)—

(a) “director”, in relation to a company, has the meaning given by section 67(1) of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (read with subsection (2) of that section) and includes any person falling within [F43 section 452(1) of the Corporation Tax Act 2010]; and

(b) “controlling director”, in relation to a company, means a director of the company who has control of it (construing control in accordance with [F44 sections 450 and 451 of the Corporation Tax Act 2010]).

Textual Amendments

F43 Words in Sch. 7 para. 12(5)(a) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), Sch. 1 para. 416(10)(a) (with Sch. 2)

F44 Words in Sch. 7 para. 12(5)(b) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), Sch. 1 para. 416(10)(b) (with Sch. 2)

Recovery of reconstruction or acquisition relief: supplementary U.K.

13 (1) The Inland Revenue may serve a notice on a person within paragraph 12(2) above requiring him within 30 days of the service of the notice to pay the amount that remains unpaid. U.K.

(2) Any such notice must be served before the end of the period of three years beginning with the date of the final determination mentioned in paragraph 12(1)(b).

(3) The notice must state the amount required to be paid by the person on whom the notice is served.

(4) The notice has effect—

(a) for the purposes of the recovery from that person of the amount required to be paid and of interest on that amount, and

(b) for the purposes of appeals,

as if it were a notice of assessment and that amount were an amount of tax due from that person.

(5) A person who has paid an amount in pursuance of a notice under this paragraph may recover that amount from the acquiring company.

(6) A payment in pursuance of a notice under this paragraph is not allowed as a deduction in computing any income, profits or losses for any tax purpose.