Finance Act 2003

Withdrawal of group relief

3 (1) Where in the case of a transaction (“the relevant transaction”) that is exempt from charge by virtue of paragraph 1 (group relief)—

(a) the purchaser ceases to be a member of the same group as the vendor—

(i) before the end of the period of three years beginning with the effective date of the transaction, or

(ii) in pursuance of, or in connection with, arrangements made before the end of that period,

and

(b) at the time the purchaser ceases to be a member of the same group as the vendor (“the relevant time”), it or a relevant associated company holds a chargeable interest—

(i) that was acquired by the purchaser under the relevant transaction, or

(ii) that is derived from a chargeable interest so acquired,

and that has not subsequently been acquired at market value under a chargeable transaction for which group relief was available but was not claimed,

group relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn and tax is chargeable in accordance with this paragraph.

(2) The amount chargeable is the tax that would have been chargeable in respect of the relevant transaction but for group relief if the chargeable consideration for that transaction had been an amount equal to the market value of the subject matter of the transaction or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.

(3) In sub-paragraphs (1) and (2) “an appropriate proportion” means an appropriate proportion having regard to the subject matter of the relevant transaction and what is held at the relevant time by the transferee company or, as the case may be, by that company and its relevant associated companies.

(4) In this paragraph—

• “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable; and

• “relevant associated company”, in relation to the purchaser, means a company that—

  (a)

  is a member of the same group as the purchaser immediately before the purchaser ceases to be a member of the same group as the vendor, and

  (b)

  ceases to be a member of the same group as the vendor in consequence of the purchaser so ceasing.

(5) This paragraph has effect subject to paragraph 4 (cases in which group relief not withdrawn).