Successions
20(1)The provisions of this paragraph apply—
(a)where the whole or part of a trade carried on by one company (" the predecessor ") is transferred to another company (" the successor ") and section 252 of the Taxes Act (company reconstructions) has effect in relation to that event; or
(b)where the whole of a trade carried on by an individual or by persons in partnership ("the predecessor") is transferred to a company resident in the United Kingdom ("the successor") and at the date of the transfer not less than three-quarters of the ordinary share capital of the company is held by that individual or those persons,
and, in either case, the trading stock is transferred at cost or at market value.
(2)Where the whole of a trade is transferred and the predecessor and successor so elect—
(a)paragraphs 4 and 13 above shall not apply to the predecessor's period of account which ends with or includes the date of transfer but, in ascertaining in the successor's period of account which begins with or includes that date and in any later period of account, the amount of unrecovered past relief allowed to a person in respect of the trade, the successor shall be treated as having carried on the trade since the predecessor began (or is himself treated, by virtue of this sub-paragraph or of any other provision of this Schedule or of Schedule 5 to the [1976 c. 40.] Finance Act 1976, as having begun) to do so ;
(b)the relief to which the predecessor is entitled under this Schedule for that trade in respect of a period of account which begins before and ends after the date of transfer shall be determined by reference to the increase, if any, in the all stocks index over the part of the period before that date;
(c)the relief to which the successor is entitled under this Schedule for that trade in respect of a period of account which begins with or includes the date of transfer shall be determined—
(i)as if the value at which the trading stock was transferred were the value of his trading stock at the end of the preceding period of account; and
(ii)if the period of account begins before the date of the transfer, by reference to the increase, if any, in the all stocks index over the part of that period beginning with that date.
(3)Where sub-paragraph (2)(a) above has effect in a case within sub-paragraph (1)(b) above the unrecovered past relief shall not include relief to which the predecessor was entitled but to which effect has not been given owing to an insufficiency of profits or gains.
(4)Sub-paragraph (2)(b) and (c) above has effect subject to paragraph 23 below.
(5)Where part of a trade is transferred and the predecessor and successor so elect, then, for the purposes of this Schedule the predecessor shall be treated as having carried on in the period of account during or at the end of which the transfer occurred a separate trade consisting of the part transferred; and all necessary apportionments between the two parts of the trade (including the apportionment of unrecovered past relief allowed for the trade) shall be made by reference to the respective values of the trading stock of each part immediately after the transfer.
(6)An election under this paragraph shall be by notice in writing signed by both the predecessor and the successor and sent to the inspector within two years after the end of the successor's period of account which begins with or includes the date of the transfer.
21(1)Subject to the provisions of this paragraph, where there is a change in the persons engaged in carrying on a trade, this Schedule applies as if the trade had been permanently discontinued at the date of the change and a new trade had been then set up and commenced.
For the purposes of this paragraph, a change in the personal representatives of any person, or in the trustees of any trust, shall not be treated as a change in the persons carrying on any trade carried on by those personal representatives or trustees as such.
(2)Where there is a change of persons but—
(a)a person engaged in carrying on the trade immediately before the change continues to be so engaged immediately after the change; and
(b)the trading stock of the trade immediately before the change is the trading stock immediately after the change,
an election may be made to the effect that sub-paragraph (1) above shall not apply to the change.
(3)An election under this paragraph must be made by all the persons engaged in carrying on the trade before the change ("the predecessors") and all those so engaged immediately after the change (" the successors ") and be signed by them and sent to the inspector within two years after the end of the successors' period of account which begins with or includes the date of the change.
Where those persons have elected under section 154(2) of the Taxes Act that the trade be treated as continuing for income tax purposes, they shall be treated as having also made an election under this paragraph.
(4)In ascertaining for the purposes of this Schedule the amount of unrecovered past relief allowed to a person in respect of a trade where at an earlier date a change in the persons carrying on that trade has been the subject of an election under the provisions of this paragraph or paragraph 21 of Schedule 5 to the [1976 c. 40.] Finance Act 1976, the successors (in relation to that change) shall be treated as having carried on the trade since the predecessors began (or are themselves treated by virtue of this sub-paragraph or any other provision of this Schedule or of Schedule 5 to the said Act of 1976. as having begun) to do so.
(5)Where during a period of account there is a change in the persons engaged in carrying on a trade, and—
(a)an election is made under this paragraph; but
(b)no election is made under section 154(2) of the Taxes Act in relation to that change,
any relief or charge under this Schedule in respect of that period of account shall be apportioned between the predecessors and successors according to the respective lengths of the parts of the period falling before and after the change, and for the purpose of giving effect to that relief or charge each of those parts shall be treated as if it were a separate period of account.