Finance Act 1996

[F1 12C (1) This paragraph applies on a merger which satisfies the conditions specified in sub-paragraph (2), where— U.K.

(a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea),

(b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a society registered under the Industrial and Provident Societies Act 1965, in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/ 2003 on the Statute for a European Cooperative Society (SCE),

(c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or

(d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures.

(2) The conditions mentioned in sub-paragraph (1) are that—

(a) each merging company is resident in a member State,

(b) the merging companies are not all resident in the same State,

(c) in the course of the merger a company resident in the United Kingdom (“company A”) transfers to a company resident in another member State (“company B”) all assets and liabilities relating to a business which company A carried on in a member State other than the United Kingdom through a permanent establishment,

(d) the transfer mentioned in paragraph (c) includes the transfer of an asset or liability representing a loan relationship, F2 ...

(e) in the case of a merger to which sub-paragraph (1)(a), (b) or (c) applies, either—

(i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or

(ii) sub-paragraph (i) is not satisfied in relation to the transfer by reason only, and to the extent only, that the transferee is prevented from complying with that sub-paragraph by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself [F3 and

(f) in the case of a merger to which sub-paragraph (1)(c) or (d) applies, in the course of the merger each transferor ceases to exist without being in liquidation (within the meaning given by section 247 of the Insolvency Act 1986 (c.55).]

(3) If tax would have been chargeable under the law of one or more other member States in respect of the transfer of an asset or liability representing a loan relationship but for the Mergers Directive, Part 18 of the Taxes Act (double taxation relief) including any arrangements having effect by virtue of section 788 F4 of that Act (bilateral relief) shall apply as if that tax had been chargeable.

(4) In calculating tax notionally chargeable under sub-paragraph (3) it shall be assumed—

(a) that to the extent permitted by the law of the other member State losses arising on the transfer are set against gains arising on the transfer, and

(b) that any relief due to company A under that law is claimed.

(5) Sub-paragraphs (6) to (9) of paragraph 12B apply for the purposes of this paragraph as they apply for the purposes of that paragraph.]

Textual Amendments

F1 Sch. 9 paras. 12B, 12C and cross-heading substituted for Sch. 9 para. 12B and cross-heading (with effect in accordance with reg. 3(2) of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007 (S.I. 2007/3186), reg. 1(2), Sch. 2 para. 8

F2 Word in Sch. 9 para. 12C(2)(d) omitted (with effect in accordance with reg. 3 of the amending S.I.) by virtue of The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), reg. 1(2), Sch. 2 para. 4(a)

F3 Sch. 9 para. 12C(2)(f) and word inserted (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), reg. 1(2), Sch. 2 para. 4(b)

F4 Section 788 was amended by paragraphs 1 and 2 of Schedule 30 to the Finance Act 2000, section 88 of the Finance Act 2002, section 198 of the Finance Act 2003, section 882 of the Income Tax (Trading and Other Income) Act 2005 and sections 176 and 178 of the Finance Act 2006.

Modifications etc. (not altering text)

C1 Sch. 9 para. 12C(2)(e) modified (temp.) (8.7.2008) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (S.I. 2008/1579), regs. 1(2), 6(1), Sch. 4 para. 3(b) (with reg. 6(2))