Finance Act 2007

11 U.K. After section 126 (movement of assets into ring fence) insert—

“126A Demergers

(1) This section applies if—

(a) C (tax-exempt) disposes of an asset to a 75% subsidiary (“S”) of C (residual),

(b) C (residual) disposes of its interest in S to another company (“P”),

(c) on the date when it acquires the interest in S, P gives a notice under section 109 (as modified by paragraph 8 of Schedule 17) which specifies an accounting period which begins within the period of six months beginning with the date of the disposal of the asset, and

(d) this Part begins to apply to the group of which S is a member from the beginning of the specified accounting period.

(2) P may give a notice under section 109 (as modified by paragraph 8 of Schedule 17) in accordance with subsection (1)(c) even if it does not expect to satisfy Conditions 3 to 6 of section 106 throughout the accounting period specified in the notice.

(3) Where this section applies—

(a) sections 111 and 112 shall not apply to the group of which S is a member in relation to the asset disposed of by C (tax-exempt) or in relation to business conducted by the exploitation of that asset, and

(b) section 125 shall not apply to the disposal of the asset by C (tax-exempt).

(4) But if, at the end of the period of six months mentioned in subsection (1)(c), Conditions 3 to 6 of section 106 are not satisfied in relation to P, subsection (3) shall be treated as not having had effect.”