Corporation Tax Act 2009

789 Merger carried out for genuine commercial reasons

(1) Sections 780 to 787 do not apply if—

(a) the transferee ceases to be a member of a group of companies (“the group”) as part of a merger,

(b) the merger is carried out for genuine commercial reasons, and

(c) the avoidance of liability to tax is not the main purpose of the merger or one of its main purposes.

(2) For this purpose “merger” means an arrangement in respect of which each of conditions A to D is met.

(3) Condition A is that—

(a) as a result of the arrangement one or more companies (“the acquiring company” or “the acquiring companies”) acquire one or more interests in the whole or part of the business which, before the arrangement took effect, was carried on by the transferee,

(b) the acquiring company is not a member of the group or, as the case may be, none of the acquiring companies is such a member,

(c) at least 25% by value of each of the interests acquired consists of a holding of ordinary share capital, and

(d) the acquisition is not with a view to the disposal of the interests.

(4) Condition B is that—

(a) as a result of the arrangement one or more members of the group acquire one or more interests in the whole or part of the business or each of the businesses which, before the arrangement took effect, was carried on—

(i) by the acquiring company or acquiring companies, or

(ii) by a company at least 90% of whose ordinary share capital was then beneficially owned by two or more of the acquiring companies,

(b) at least 25% by value of each of the interests acquired consists of a holding of ordinary share capital,

(c) the remainder of the interest, or as the case may be of each of the interests, acquired consists of a holding of share capital (of any description) or debentures or both, and

(d) the acquisition is not with a view to the disposal of the interests.

(5) Condition C is that the value or, as the case may be, the total value of the interest or interests acquired as mentioned in subsection (3) is substantially the same as the value or, as the case may be, the total value of the interest or interests acquired as mentioned in subsection (4).

(6) Condition D is that the consideration for the acquisition of the interest or interests acquired by the acquiring company or acquiring companies as mentioned in subsection (3)—

(a) consists of, or is applied in the acquisition of, the interest or interests acquired by members of the group as mentioned in subsection (4), or

(b) consists partly of, and as to the balance is applied in the acquisition of, that interest or those interests.

(7) Section 790 supplements this section.