Finance Act 1994

Continuity in relation to capital allowances etc where trade transferred U.K.

20 (1) Subject to the following provisions of this Schedule, where, apart from this paragraph— U.K.

(a) the predecessor would be treated for the purposes of the Corporation Tax Acts as having ceased, by virtue of the coming into force of a relevant transfer, to carry on any trade, and

(b) the transferee would be treated as having begun, on the coming into force of that transfer, to carry it on,

then F1 ... sub-paragraphs (2) to (4) below shall apply.

(2) Subject to sub-paragraphs (3) and (4) below, in a case falling within sub-paragraph (1) above—

(a) there shall be made to or on the transferee in accordance with [F2 the Capital Allowances Act] all such allowances and charges as would, if the predecessor had continued to carry on the trade, have fallen to be made to or on the predecessor; and

(b) the amount of any such allowance or charge shall be computed as if—

(i) the transferee had been carrying on the trade since the predecessor began to do so; and

(ii) everything done to or by the predecessor had been done to or by the transferee (but so that the relevant transfer itself, so far as it relates to any assets in use for the purpose of the trade, shall not be treated as giving rise to any such allowance or charge).

(3) For the purposes of the Corporation Tax Acts, only such amounts (if any) as may be specified in or determined in accordance with the restructuring scheme providing for a relevant transfer shall be allocated to the transferee in respect of expenditure by reference to which capital allowances may be made by virtue of sub-paragraph (2) above in relation to anything to which the transfer relates.

(4) Sub-paragraph (2) above shall affect the amounts falling to be taken into account in relation to the predecessor as expenditure by reference to which capital allowances may be made only so far as necessary to give effect to a reduction of any such amount by a sum equal to so much of that amount as is allocated to the transferee as mentioned in sub-paragraph (3) above.

(5) Subject to sub-paragraph (6) below, the provisions of a restructuring scheme providing for the determination of any amount which for the purposes of sub-paragraph (3) above is to be allocated, in the case of any relevant transfer, to the transferee may include provision—

(a) for such a determination to be made by the Secretary of State in such manner as may be described in the scheme;

(b) for any amount determined to be calculated by reference to such factors or to the opinion of such person as may be so described; and

(c) for a determination under those provisions to be capable of being modified, on one or more occasions, in such manner and in such circumstances as may be so described.

(6) The consent of the Treasury shall be required for the making or modification of a determination of any such amount as is mentioned in sub-paragraph (5) above; and the consent of the transferee shall also be required for any such modification after the coming into force of the relevant transfer.

(7) This sub-paragraph applies in any case where assets which are the subject of a relevant transfer became vested in the predecessor by virtue of a transfer made by a company; and in any such case—

(a) if the predecessor held a direct or indirect interest in the company at the time of the transfer by the company, that interest shall be treated for the purposes of sub-paragraph (2)(b)(ii) above as if it had instead been held by the transferee;

(b) if the company held a direct or indirect interest in the predecessor at the time of the transfer by the company, the interest which the company held in the predecessor shall be treated for the purposes of sub-paragraph (2)(b)(ii) above as if it had instead been the corresponding interest in the transferee; and

(c) if there was a person who, at the time of the transfer by the company, held—

(i) a direct or indirect interest in the predecessor, and

(ii) a direct or indirect interest in the company,

the interest which that person held at that time in the predecessor shall be treated for the purposes of sub-paragraph (2)(b)(ii) above as if it had instead been the corresponding interest in the transferee.

(8) Neither section 343 of the Taxes Act 1988 (company reconstructions without change of ownership) nor [F3 sections 266 and 267 of the Capital Allowances Act (election where predecessor and successor are connected persons)] shall have effect in a case falling within sub-paragraph (1) above.

(9) In determining whether sub-paragraph (1) above has effect in relation to a relevant transfer in a case where—

(a) the predecessor continues to carry on any trade or part of a trade after the coming into force of the transfer, or

(b) the transferee was carrying on any trade before the coming into force of the transfer,

the trade or part of a trade which is continued or, as the case may be, was being carried on shall for the purposes of that sub-paragraph be treated in relation to any trade or part of a trade which is transferred by virtue of the transfer as a separate trade and shall accordingly be disregarded.

(10) Where there is a determination, or a modification of a determination, for any purposes of this paragraph, all necessary adjustments shall be made by making assessments or by repayment or discharge of tax, and shall be so made notwithstanding any limitation on the time within which assessments may be made.

Textual Amendments

F1 Words in Sch. 24 para. 20(1) repealed (1.4.2009) (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 398, Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F2 Words in Sch. 24 para. 20(1)(2)(a) substituted (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, ss. 578, 579, Sch. 2 para. 91(3)

F3 Words in Sch. 24 para. 20(8) substituted (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, ss. 578, 579, Sch. 2 para. 91(4)