Finance Act 2009

Part 1 U.K. Licence swaps

1 U.K. TCGA 1992 is amended as follows.

2 U.K. In section 35(3) (assets held on 31 March 1982, including assets held on 6 April 1965)—

(a) in paragraph (c), omit the “or” at the end, and

(b) after that paragraph insert—

“(ca) where, by virtue of section 195B, 195C or 195E, neither a gain nor a loss accrues to the person making the disposal, or”.

3 U.K. In section 55 (assets owned on 31 March 1982 or acquired on a no gain/no loss disposal), after subsection (5) insert—

“(5A) For the purposes of subsection (5), a disposal is also a no gain/no loss disposal if it is one on which, by virtue of section 195B, 195C or 195E, neither a gain nor a loss accrues to the person making the disposal; but, in such a case, subsection (6)(b) below does not apply.”

4 U.K. In section 175(2C)(b) (replacement of business assets by members of a group), after “applies” insert “ or is one where, by virtue of section 195B, 195C or 195E, neither a gain nor a loss accrues to the person making the disposal ”.

5 U.K. After section 195 insert—

“195A Oil licence swaps

(1) Sections 195B to 195E apply for the purposes of corporation tax on chargeable gains.

(2) In those sections—

• “licence-consideration swap” means a case where conditions A, B, C and D are met;

• “mixed-consideration swap” means a case where conditions A, B, C and E are met.

(3) Condition A is that a company (“company A”) disposes of one or more UK licences to another company (“company B”), by way of a bargain at arm's length (“disposal A”).

(4) Condition B is that company B disposes of one or more UK licences to company A, by way of a bargain at arm's length (“disposal B”).

(5) Condition C is that either or both of the following paragraphs applies—

(a) the licence, or at least one of the licences, comprised in disposal A relates to a developed area;

(b) the licence, or at least one of the licences, comprised in disposal B relates to a developed area.

(6) Condition D is that both—

(a) disposal A is the only consideration given for disposal B, and

(b) disposal B is the only consideration given for disposal A.

(7) Condition E is that either—

(a) disposal A is the only consideration given for disposal B, or

(b) disposal B is the only consideration given for disposal A,

(and accordingly one of the disposals is part of the consideration given for the other disposal).

(8) In this section and sections 195B to 196 a reference to disposal of a UK licence includes—

(a) a disposal of an interest in a UK licence, and

(b) a disposal of a UK licence, or an interest in a UK licence, only so far as the licence relates to part of the licensed area.

195B Licence-consideration swap

(1) This section applies to a licence-consideration swap.

(2) Each company participating in the swap is to be treated as follows.

(3) As regards the licence, or each licence, which the company disposes of, the company is to be treated as if it had disposed of that licence for a consideration of such amount as to secure that on the disposal neither a gain nor a loss accrues to the company.

(4) In a case where the company acquires only one licence, the company is to be treated as if it had acquired the licence for a consideration of the same amount as the deemed disposal consideration.

(5) In a case where the company acquires two or more licences, as regards each licence acquired, the company is to be treated as if it had acquired that licence for a consideration of—

where—

DDC is the deemed disposal consideration,

A is the value of the licence acquired, and

TA is total value of all the licences acquired.

(6) In this section “deemed disposal consideration”, in relation to a company participating in the swap, means—

(a) the amount of the consideration for which the company is, under subsection (3), treated as having disposed of its licence (if the company disposes of only one licence), or

(b) the aggregate of all such amounts (if the company disposes of two or more licences).

195C Company that receives mixed consideration: N exceeds C

(1) This section applies to a mixed-consideration swap if—

(a) the no gain/no loss loss amount (“N”) of the company that receives the mixed consideration (“company R”), exceeds

(b) the amount of non-licence consideration (“C”) which company R receives.

(2) In a case where company R acquires only one licence, company R is to be treated as if it had acquired the licence for a consideration of—

(3) In a case where company R acquires two or more licences, as regards each licence acquired, company R is to be treated as if it had acquired the licence for a consideration of—

where—

A is the value of the licence acquired, and

TA is total value of all the licences acquired.

(4) The disposal by company R of a licence under the swap is to be taken to be one on which neither a gain nor a loss accrues.

(5) But (despite subsection (4)), the disposal by company R is not a no gain/no loss disposal for the purposes of section 56.

(6) For the purposes of the application of sections 53 and 54, any enactment is to be disregarded insofar as it provides that, if the other company which acquires a licence under the swap (“company G”) subsequently disposes of the licence, company R's acquisition of the licence is to be treated as company G's acquisition of it.

(7) In this section the reference to the no gain/no loss amount of company R is a reference to—

(a) in a case where company R disposes of only one licence, company R's no gain/no loss amount in relation to that disposal, or

(b) in a case where company R disposes of two or more licences, the aggregate of company R's no gain/no loss amounts in relation to all of those disposals.

195D Company that receives mixed consideration: N does not exceed C

(1) This section applies to a mixed-consideration swap if—

(a) the no gain/no loss amount (“N”) of the company that receives the mixed consideration (“company R”) does not exceed

(b) the amount of non-licence consideration (“C”) which company R receives.

(2) As regards the licence, or each licence, which company R acquires, company R is to be treated as if it had acquired the licence for nil consideration.

(3) In a case where company R disposes of only one licence, company R is to be treated as if, on the disposal of the licence, there had arisen a gain of—

(4) In a case where company R disposes of two or more licences, as regards each licence disposed of, company R is to be treated as if, on the disposal of the licence, there had arisen a gain of—

where—

D is the value of the licence disposed of, and

TD is total value of all the licences disposed of.

195E Company that gives mixed consideration

(1) This section applies to a mixed-consideration swap—

(a) whatever the no gain/no loss amount (“N”) of the company that gives the mixed consideration (“company G”), and

(b) whatever the amount of the non-licence consideration (“C”) which company G gives.

(2) In a case where company G acquires only one licence, company G is to be treated as if it had acquired the licence for a consideration of—

(3) In a case where company G acquires two or more licences, as regards each licence acquired, company G is to be treated as if it had acquired the licence for a consideration of—

where—

A is the value of the licence acquired, and

TA is total value of all the licences acquired.

(4) The disposal by company G of a licence under the swap is to be taken to be one on which neither a gain nor a loss accrues.

(5) But (despite subsection (4)), the disposal by company G is not a no gain/no loss disposal for the purposes of section 56.

(6) For the purposes of the application of sections 53 and 54, any enactment is to be disregarded insofar as it provides that, if the other company which acquires a licence under the swap (“company R”) subsequently disposes of the licence, company G's acquisition of the licence is to be treated as company R's acquisition of it.

(7) In this section the reference to the no gain/no loss amount of company G is a reference to—

(a) in a case where company G disposes of only one licence, company G's no gain/no loss amount in relation to that disposal, or

(b) in a case where company G disposes of two or more licences, the aggregate of company G's no gain/no loss amounts in relation to all of those disposals.”

6 (1) Section 196 (interpretation of sections 194 and 195) is amended as follows. U.K.

(2) In the heading, for “and 195” substitute “ to 195E ”.

(3) In subsection (1), after “section 194” insert “ and this section ”.

(4) After subsection (1A) insert—

“(1B) In sections 195A to 195E, a reference to a UK licence that relates to a developed area is a reference to any UK licence apart from one that relates to an undeveloped area.”

(5) In subsection (2), for “and (1A)” substitute “ to (1B) ”.

(6) In subsection (3), after “(1)” insert “ or (1B) ”.

(7) In subsection (5)—

(a) for “and 195” substitute “ to 195E ”,

(b) after the definition of “licence” insert—

““licence-consideration swap” has the meaning given in section 195A(2);”, and

(c) after the definition of “licensee” insert—

““mixed consideration” means consideration that consists partly of disposal of a UK licence;

“mixed-consideration swap” has the meaning given in section 195A(2);

“no gain/no loss amount”, in relation to a company that disposes of a UK licence, means the amount that would be taken to be the consideration for the disposal if section 56(2) applied to the disposal;

“non-licence consideration” means consideration that does not consist of disposal of a UK licence, as determined at the time the swap arrangements are entered into;

“swap arrangements”, in relation to a licence-consideration swap or a mixed-consideration swap, means the arrangements under which the swap takes place;”.

(8) After subsection (5A) insert—

“(5B) In any of sections 195B to 195E, a reference to the value of a licence comprised in disposal A or disposal B (see section 195A) is a reference to the value of the licence as determined under the swap arrangements at the time the swap arrangements are entered into.”

7 U.K. In Schedule 3 (assets held on 31 March 1982), in paragraph 1(2) (meaning of no gain/no loss disposal), after “provisions” insert “ or any of sections 195B, 195C or 195E ”.

8 U.K. The amendments made by this Part have effect in relation to disposals made on or after 22 April 2009.