Part VI Companies, oil, insurance etc.

Chapter I Companies

Demergers

C1192 Tax exempt distributions.

1

This section has effect for facilitating certain transactions whereby trading activities carried on by a single company or group are divided so as to be carried on by 2 or more companies not belonging to the same group or by 2 or more independent groups.

2

Where a company makes F3a distribution which is exempt by virtue of section 1076 of CTA 2010—

a

the distribution shall not be a capital distribution for the purposes of section 122; and

b

sections 126 to 130 shall, with the necessary modifications, apply as if that company and the subsidiary whose shares are transferred were the same company and the distribution were a reorganisation of its share capital.

3

Subject to subsection (4) below, F1section 179 shall not apply in a case where a company ceases to be a member of a group by reason only of an exempt distribution.

4

Subsection (3) does not apply if within 5 years after the making of the exempt distribution there is chargeable payment; and the time for making an assessment under section F2... 179 by virtue of this subsection shall not expire before the end of 3 years after the making of the chargeable payment.

5

In this section—

  • “chargeable payment” has the meaning given in F4section 1088 of CTA 2010;

  • “exempt distribution” means a distribution which is exempt by virtue of F5section 1076 or 1077 of CTA 2010; and

  • “group” means a company which has one or more 75 per cent. subsidiaries together with that or those subsidiaries.

6

In determining for the purposes of this section whether one company is a 75 per cent. subsidiary of another, the other company shall be treated as not being the owner of—

a

any share capital which it owns directly in a body corporate if a profit on a sale of the shares would be treated as a trading receipt of its trade; or

b

any share capital which it owns indirectly and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.