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Finance Act 1970

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This is the original version (as it was originally enacted).

Capital gains

27Mergers: exemption from charge on company ceasing to be a member of a group

The following section shall be inserted after section 278 of the Taxes Act (charge to corporation tax on company ceasing to be a member of a group in respect of assets previously acquired by a transfer within the group)—

278AExemption from charge under s. 278 in the case of certain mergers.

(1)Subject to the following provisions of this section, section 278 above shall not apply in a case where—

(a)as part of a merger, a company (in this section referred to as " company A ") ceases to be a member of a group of companies (in this section referred to as " the A group "); and

(b)it is shown that the merger was carried out for bona fide commercial reasons and that the avoidance of liability to tax was not the main or one of the main purposes of the merger.

(2)In this section " merger " means an arrangement (which in this section includes a series of arrangements)—

(a)whereby one or more companies (in this section referred to as " the acquiring company " or, as the case may be, " the acquiring companies ") none of which is a member of the A group acquires or acquire, otherwise than with a view to their disposal, one or more interests in the whole or part of the business which, before the arrangement took effect, was carried on by company A; and

(b)whereby one or more members of the A group acquires or acquire, otherwise than with a view to their disposal, one or more interests in the whole or part of the business or each of the businesses which, before the arrangement took effect, was carried on either by the acquiring company or acquiring companies or by a company at least 90 per cent, of the ordinary share capital of which was then beneficially owned by two or more of the acquiring companies; and

(c)in respect of which the conditions in subsection (4) below are fulfilled.

(3)For the purposes of subsection (2) above, a member of a group of companies shall be treated as carrying on as one business the activities of that group.

(4)The conditions referred to in subsection (2)(c) above are—

(a)that not less than 25 per cent, by value of each of the interests acquired as mentioned in paragraphs (a) and (b) of subsection (2) above consists of a holding of ordinary share capital, and the remainder of the interest, or as the case may be of each of the interests, acquired as mentioned in the said paragraph (b) consists of a holding of share capital (of any description) or debentures or both; and

(b)that the value or, as the case may be, the aggregate value of the interest or interests acquired as mentioned in subsection (2)(a) above is substantially the same as the value or, as the case may be, the aggregate value of the interest or interests acquired as mentioned in subsection (2)(b) above; and

(c)that the consideration for the acquisition of the interest or interests acquired by the acquiring company or acquiring companies as mentioned in subsection (2)(a) above, disregarding any part of that consideration which is small by comparison with the total, either consists of, or is applied in the acquisition of, or consists partly of and as to the balance is applied in the acquisition of, the interest or interests acquired by members of the A group as mentioned in subsection (2)(b) above ;

and for the purposes of this subsection the value of an interest shall be determined as at the date of its acquisition.

(5)Notwithstanding the provisions of section 272(1)(a) above, references in this section to a company include references to a company resident outside the United Kingdom.

28Extension of class of securities exempt from tax on capital gains

(1)For the purpose of section 41 of, and Schedule 18 to, the [1969 c. 32.] Finance Act 1969 and of section 270 of the Taxes Act (gilt-edged securities exempt from tax on capital gains: consequential charge on short-term disposals etc. by companies) in the expression " stocks and registered bonds ", in each place where it occurs in those provisions, the word " registered " shall be, and shall be deemed always to have been, omitted.

(2)All such adjustments of tax shall be made, whether by way of discharge or repayment or by way of assessment, as may be required in consequence of this section.

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