SCHEDULES

SCHEDULE 7 U.K. Stamp duty land tax: group relief and reconstruction and acquisition reliefs

Part 1 U.K. Group relief

Group relief U.K.

1 (1) A transaction is exempt from charge if the vendor and purchaser are companies that at the effective date of the transaction are members of the same group. U.K.

(2) For the purposes of group relief—

(a) “company” means a body corporate, and

(b) companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company.

(3) For the purposes of group relief a company (“company A”) is the 75% subsidiary of another company (“company B”) if company B—

(a) is beneficial owner of not less than 75% of the ordinary share capital of company A,

(b) is beneficially entitled to not less than 75% of any profits available for distribution to equity holders of company A, and

(c) would be beneficially entitled to not less than 75% of any assets of company A available for distribution to its equity holders on a winding-up.

(4) The ownership referred to in sub-paragraph (3)(a) is ownership either directly or through another company or companies.

For the purposes of that provision the amount of ordinary share capital of company A owned by company B through another company or companies shall be determined in accordance with section 838(5) to (10) of the Taxes Act 1988.

(5) In sub-paragraphs (3)(a) and (4) above “ordinary share capital”, in relation to a company, means all the issued share capital (by whatever name called) of the company, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company.

(6) Schedule 18 to the Taxes Act 1988 (equity holders and profits or assets available for distribution) applies for the purposes of subsection (3)(b) and (c) above as it applies for the purposes of section 413(7)(a) and (b) of that Act, but with the omission of paragraphs 5(3) and 5B to 5E.

(7) This paragraph is subject to paragraph 2 (restrictions on availability of group relief) and [F1 paragraphs 3 and 4A] (withdrawal of group relief).

Textual Amendments

F1 Words in Sch. 7 para. 1(7) substituted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 3

Modifications etc. (not altering text)

C1 Sch. 7 para. 1 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 43(2)

Restrictions on availability of group relief U.K.

2 (1) Group relief is not available if at the effective date of the transaction there are arrangements in existence by virtue of which, at that or some later time, a person has or could obtain, or any persons together have or could obtain, control of the purchaser but not of the vendor. U.K.

This does not apply to arrangements entered into with a view to an acquisition of shares by a company (“the acquiring company”)—

(a) in relation to which section 75 of the Finance Act 1986 (c. 41) (stamp duty: acquisition relief) will apply,

(b) in relation to which the conditions for relief under that section will be met, and

(c) as a result of which the purchaser will be a member of the same group as the acquiring company.

[F2 For another exception to this, see sub-paragraph (3A).]

(2) Group relief is not available if the transaction is effected in pursuance of, or in connection with, arrangements under which—

(a) the consideration, or any part of the consideration, for the transaction is to be provided or received (directly or indirectly) by a person other than a group company, or

(b) the vendor and the purchaser are to cease to be members of the same group by reason of the purchaser ceasing to be a 75% subsidiary of the vendor or a third company.

(3) Arrangements are within sub-paragraph (2)(a) if under them the vendor or the purchaser, or another group company, is to be enabled to provide any of the consideration, or is to part with any of it, by or in consequence of the carrying out of a transaction or transactions involving, or any of them involving, a payment or other disposition by a person other than a group company.

[F3 (3A) Sub-paragraphs (1) and (2)(b) do not apply to arrangements in so far as they are for the purpose of facilitating a transfer of the whole or part of the business of a company to another company in relation to which—

(a) section 96 of the Finance Act 1997 is intended to apply (stamp duty relief: demutualisation of insurance companies), and

(b) the conditions for relief under that section are intended to be met.]

(4) In sub-paragraphs (2)(a) and (3) a “group company” means a company that at the effective date of the transaction is a member of the same group as the vendor or the purchaser.

[F4 (4A) Group relief is not available if the transaction—

(a) is not effected for bona fide commercial reasons, or

(b) forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of liability to tax.

“Tax” here means stamp duty, income tax, corporation tax, capital gains tax or tax under this Part.]

(5) In this paragraph—

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

• “control” has the meaning given by section 840 of the Taxes Act 1988.

Textual Amendments

F2 Words in Sch. 7 para. 2(1) inserted (with effect in accordance with s. 167(5) of the amending Act) by Finance Act 2006 (c. 25), s. 167(2)

F3 Sch. 7 para. 2(3A) inserted (with effect in accordance with s. 167(5) of the amending Act) by Finance Act 2006 (c. 25), s. 167(3)

F4 Sch. 7 para. 2(4A) inserted (with effect in accordance with Sch. 10 para. 22(1)-(3)(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 19

Withdrawal of group relief U.K.

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

(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.

[F5 (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—

(a) the market value of the subject-matter of the transaction, and

(b) if the acquisition was the grant of a lease at a rent, that rent,

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 [F6 paragraphs 4 and 4ZA] (cases in which group relief not withdrawn) [F7 and paragraph 4A (withdrawal of group relief in certain cases involving successive transactions)].

Textual Amendments

F5 Sch. 7 para. 3(2) substituted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 4(a)

F6 Words in Sch. 7 para. 3(5) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(2)

F7 Words in Sch. 7 para. 3(5) inserted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 4(b)

Modifications etc. (not altering text)

C2 Sch. 7 para. 3(1) modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 43(3)

Cases in which group relief not withdrawn U.K.

4 (1) Group relief is not withdrawn under paragraph 3 in the following cases. U.K.

F8 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The second case is where the purchaser ceases to be a member of the same group as the vendor by reason of anything done for the purposes of, or in the course of, winding up the vendor or another company that is above the vendor in the group structure.

(5) For [F10 the purposes of [F11 sub-paragraph (4)]] a company is “above” the vendor in the group structure if the vendor, or another company that is above the vendor in the group structure, is a 75% subsidiary of the company.

(6) The third case is where—

(a) the purchaser ceases to be a member of the same group as the vendor as a result of an acquisition of shares by another company (“the acquiring company”) in relation to which—

(i) section 75 of the Finance Act 1986 (c. 41) applies (stamp duty: acquisition relief), and

(ii) the conditions for relief under that section are met,

and

(b) the purchaser is immediately after that acquisition a member of the same group as the acquiring company.

[F12 (6A) The fourth case is where—

(a) the purchaser ceases to be a member of the same group as the vendor as a result of the transfer of the whole or part of the vendor's business to another company (“the acquiring company”) in relation to which—

(i) section 96 of the Finance Act 1997 applies (stamp duty relief: demutualisation of insurance companies), and

(ii) the conditions for relief under that section are met, and

(b) the purchaser is immediately after that transfer a member of the same group as the acquiring company.]

(7) But if in a case within sub-paragraph (6) [F13 or (6A)] —

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

(i) before the end of the period of three years beginning with the effective date of the relevant 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 acquiring company, 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 an 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,

the provisions of this Part relating to group relief apply as if the purchaser had then ceased to be a member of the same group as the vendor.

(8) In sub-paragraph (7)—

• “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 is a member of the same group as the purchaser that ceases to be a member of the same group as the acquiring company in consequence of the purchaser so ceasing.

Textual Amendments

F8 Sch. 7 para. 4(2) omitted (with effect in accordance with s. 96(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 96(3)(a)

F9 Sch. 7 para. 4(3) omitted (with effect in accordance with s. 96(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 96(3)(a)

F10 Words in Sch. 7 para. 4(5) substituted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 5(b)

F11 Words in Sch. 7 para. 4(5) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(3)(b)

F12 Sch. 7 para. 4(6A) inserted (with effect in accordance with s. 167(5) of the amending Act) by Finance Act 2006 (c. 25), s. 167(4)(a)

F13 Words in Sch. 7 para. 4(7) inserted (with effect in accordance with s. 167(5) of the amending Act) by Finance Act 2006 (c. 25), s. 167(4)(b)

[F14 Group relief not withdrawn where vendor leaves group U.K.

Textual Amendments

F14 Sch. 7 para. 4ZA and cross-heading inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(4)

4ZA (1) Group relief is not withdrawn under paragraph 3 where the purchaser ceases to be a member of the same group as the vendor because the vendor leaves the group. U.K.

(2) The vendor is regarded as leaving the group if the companies cease to be members of the same group by reason of a transaction relating to shares in—

(a) the vendor, or

(b) another company that—

(i) is above the vendor in the group structure, and

(ii) as a result of the transaction ceases to be a member of the same group as the purchaser.

(3) For the purpose of sub-paragraph (2) a company is “above” the vendor in the group structure if the vendor, or another company that is above the vendor in the group structure, is a 75% subsidiary of the company.

(4) But if there is a change in the control of the purchaser after the vendor leaves the group, paragraphs 3, 4(6) and (7), 5 and 6 have effect as if the purchaser had then ceased to be a member of the same group as the vendor (but see sub-paragraph (7)).

(5) For the purposes of this paragraph there is a change in the control of the purchaser if—

(a) a person who controls the purchaser (alone or with others) ceases to do so,

(b) a person obtains control of the purchaser (alone or with others), or

(c) the purchaser is wound up.

(6) For the purposes of sub-paragraph (5) a person does not control, or obtain control of, the purchaser if that person is under the control of another person or other persons.

(7) Sub-paragraph (4) does not apply where—

(a) there is a change in the control of the purchaser because a loan creditor (within the meaning of section 417(7) to (9) of the Taxes Act 1988) obtains control of, or ceases to control, the purchaser, and

(b) the other persons who controlled the purchaser before that change continue to do so.

(8) In this paragraph references to “control” shall be interpreted in accordance with section 416 of the Taxes Act 1988 (subject to sub-paragraph (6)).]

[F15 Withdrawal of group relief in certain cases involving successive transactions U.K.

Textual Amendments

F15 Sch. 7 para. 4A and cross-heading inserted (with effect in accordance with Sch. 10 para. 16(1)(6)-(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 10 para. 6

4A (1) Where, in the case of a transaction (“the relevant transaction”) that is exempt from charge by virtue of paragraph 1 (group relief)— U.K.

(a) there is a change in the control of the purchaser,

(b) that change occurs—

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

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

(c) apart from this paragraph, group relief in relation to the relevant transaction would not be withdrawn under paragraph 3, and

(d) any previous transaction falls within sub-paragraph (2),

paragraphs 3 [F16 , 4 and 4ZA] have effect in relation to the relevant transaction as if the vendor in relation to the earliest previous transaction falling within sub-paragraph (2) were the vendor in relation to the relevant transaction.

[F17 (1A) Sub-paragraph (1) has effect subject to sub-paragraph (3A).]

(2) A previous transaction falls within this sub-paragraph if—

(a) the previous transaction is exempt from charge by virtue of paragraph 1, 7 or 8,

(b) the effective date of the previous transaction is less than three years before the date of the event falling within sub-paragraph (1)(a),

(c) the chargeable interest acquired under the relevant transaction by the purchaser in relation to that transaction is the same as, comprises, forms part of, or is derived from, the chargeable interest acquired under the previous transaction by the purchaser in relation to the previous transaction, and

(d) since the previous transaction, the chargeable interest acquired under that transaction has not been acquired by any person under a transaction that is not exempt from charge by virtue of paragraph 1, 7 or 8.

(3) For the purposes of [F18 this paragraph] there is a change in the control of a company if—

(a) any person who controls the company (alone or with others) ceases to do so,

(b) a person obtains control of the company (alone or with others), or

(c) the company is wound up.

References to “control” in [F19 this paragraph] shall be construed in accordance with section 416 of the Taxes Act 1988.

[F20 (3A) Sub-paragraph (1) does not apply where—

(a) there is a change in the control of the purchaser because a loan creditor (within the meaning of section 417(7) to (9) of the Taxes Act 1988) obtains control of, or ceases to control, the purchaser, and

(b) the other persons who controlled the purchaser before that change continue to do so.]

(4) If two or more transactions effected at the same time are the earliest previous transactions falling within sub-paragraph (2), the reference in sub-paragraph (1) to the vendor in relation to the earliest previous transaction is a reference to the persons who are the vendors in relation to the earliest previous transactions.

(5) In this paragraph “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.]

Textual Amendments

F16 Words in Sch. 7 para. 4A(1) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(a)

F17 Sch. 7 para. 4A(1A) inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(b)

F18 Words in Sch. 7 para. 4A(3) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(c)(i)

F19 Words in Sch. 7 para. 4A(3) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(c)(ii)

F20 Sch. 7 para. 4A(3A) inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2008 (c. 9), s. 96(5)(d)

Recovery of group relief from another group company or controlling director U.K.

5 (1) This paragraph applies where— U.K.

(a) tax is chargeable under paragraph 3 (withdrawal of group relief),

(b) the amount so chargeable has been finally determined, and

(c) the whole or part of the amount so chargeable is unpaid six months after the date on which it became payable.

(2) The following persons may, by notice under paragraph 6, be required to pay the unpaid tax—

(a) the vendor;

(b) any company that at any relevant time was a member of the same group as the purchaser and was above it in the group structure;

(c) any person who at any relevant time was a controlling director of the purchaser or a company having control of the purchaser.

(3) For the purposes of sub-paragraph (2)(b)—

(a) a “relevant time” means any time between the effective date of the relevant transaction and the purchaser ceasing to be a member of the same group as the vendor; and

(b) a company (“company A”) is “above” another company (“company B”) in a group structure if company B, or another company that is above company B in the group structure, is a 75% subsidiary of company A.

(4) In sub-paragraph (2)(c)—

• “director”, in relation to a company, has the meaning given by section 67(1) of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (read with subsection (2) of that section) and includes any person falling within section 417(5) of the Taxes Act 1988 (read with subsection (6) of that section); and

• “controlling director”, in relation to a company, means a director of the company who has control of it (construing control in accordance with section 416 of the Taxes Act 1988).

Recovery of group relief: supplementary U.K.

6 (1) The Inland Revenue may serve a notice on a person within paragraph 5(2) above requiring him within 30 days of the service of the notice to pay the amount that remains unpaid. U.K.

(2) Any such notice must be served before the end of the period of three years beginning with the date of the final determination mentioned in paragraph 5(1)(b).

(3) The notice must state the amount required to be paid by the person on whom the notice is served.

(4) The notice has effect—

(a) for the purposes of the recovery from that person of the amount required to be paid and of interest on that amount, and

(b) for the purposes of appeals,

as if it were a notice of assessment and that amount were an amount of tax due from that person.

(5) A person who has paid an amount in pursuance of a notice under this paragraph may recover that amount from the purchaser.

(6) A payment in pursuance of a notice under this paragraph is not allowed as a deduction in computing any income, profits or losses for any tax purpose.