Income Tax Act 2007

Acquisitions for restructuring purposes U.K.

326 Restructuring to which [F1 sections 326A, 327 and 327A apply] U.K.

(1) [F2 Sections 326A, 327 and 327A apply] if—

(a) arrangements are made for a company (“the new company”) to acquire all the shares (“old shares”) in another company (“the old company”),

(b) the acquisition provided for by the arrangements falls within subsection (2), and

(c) the Commissioners for Her Majesty's Revenue and Customs have, before any exchange of shares takes place under the arrangements, given an approval notification.

(2) An acquisition of shares falls within this subsection if—

(a) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,

(b) new shares are issued in consideration of old shares only at times when there are no issued shares in the new company other than subscriber shares and new shares previously issued in consideration of old shares,

(c) the consideration for new shares of each description consists wholly of old shares of the corresponding description, and

(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of, and in proportion to, their holdings.

(3) For the purposes of subsection (1)(c) an approval notification is one which, on the application of either the old company or the new company, is given to the applicant company and states that the Commissioners for Her Majesty's Revenue and Customs are satisfied that the exchange of shares under the arrangements—

(a) will be effected for genuine commercial reasons, and

(b) will not form part of any such scheme or arrangements as are mentioned in section 137(1) of TCGA 1992 (schemes with avoidance purposes).

(4) [F3 Nothing in section 326A treats any of the requirements of Chapter 3 as being met, and nothing in section 327 treats any of the requirement of Chapter 4 as being met] in relation to any new shares unless the matching old shares were first issued to the company holding them and have been held by that company from the time when they were issued until they are acquired by the new company.

(5) If, at any time after the arrangements first came into existence and before the new company acquired all the old shares, the arrangements—

(a) cease to be arrangements for the acquisition of all the old shares by the new company, or

(b) cease to be arrangements for an acquisition falling within subsection (2),

section [F4 326A does not treat any requirement of Chapter 3 as being met and section] 327 does not treat any requirement of Chapter 4 as being met, and subsection (8) of that section does not apply, in the case of any new shares at any time after the arrangements have so ceased.

Textual Amendments

F1 Words in s. 326 heading substituted (with effect in accordance with s. 12(4) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 12(2)(a)

F2 Words in s. 326(1) substituted (with effect in accordance with s. 12(4) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 12(2)(b)

F3 Words in s. 326(4) substituted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 16(3)

F4 Words in s. 326(5) inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 16(4)

[F5 326A Certain requirements of Chapter 3 to be treated as met U.K.

(1) If this section applies, subsections (2) to (6) have effect to determine the extent to which, and the time for which, the following conditions in Chapter 3 are met in relation to the old shares and the new shares—

• the investment limits condition (see section 280B);

• the permitted maximum age condition (see section 280C);

• the no business acquisition condition (see section 280D).

(2) If—

(a) there is an exchange under the arrangements of any new shares for any old shares, and

(b) those old shares are an investment in relation to which the investment limits condition, the permitted maximum age condition or the no business acquisition condition is (or is treated as being) met to any extent,

those conditions are to be treated as met to the same extent in relation to the matching new shares.

See subsections (3) to (6) for further provision about when those conditions are treated as met in relation to the old shares.

(3) If—

(a) the exchange occurs during the period of 5 years beginning with the day after the day on which the old shares were issued, and

(b) those old shares are shares in relation to which section 280B(2)(c) applies,

section 280B(2)(c) is to be treated as applying in relation to the matching new shares.

(4) In determining whether section 280B(2)(c) applies in relation to the old shares—

(a) condition A is treated as met if it would be met if the reference in section 280B(3B)(a)(i) to a company which becomes a 51% subsidiary of the relevant company during the 5-year post-investment period included a reference to a company which becomes a 51% subsidiary of the new company during that period otherwise than as a result of the exchange, and

(b) in relation to investments made or trades transferred at or after the time of the exchange, references to the relevant company in section 280B(3C)(b) and (3F)(a) are to be read as references to the new company.

(5) The permitted maximum age condition is met in relation to the old shares if (and only if) it would be met if—

(a) in section 280C(5)(a)(ii) and (6)(a) the references to relevant investments made in the relevant company included a reference to the relevant investments made in the new company,

(b) in section 280C(7)(d) and (f) the references to the relevant company included a reference to the new company,

(c) in paragraphs (a)(ii) and (b)(iii) of the definition of “the total relevant turnover amount” in section 280C(9) the reference to a company which becomes a 51% subsidiary of the relevant company after the investment date included a reference to a company which becomes a 51% subsidiary of the new company after that date otherwise than as a result of the exchange.

(6) The no business acquisition condition is met in relation to the old shares if (and only if) it would be met if, in section 280D(2), references to the relevant company were read as including a reference to the new company.]

Textual Amendments

F5 S. 326A inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 17

327 Certain requirements of Chapter 4 to be treated as met U.K.

(1) If this section applies, subsections (2) to (8) have effect to determine the extent to which, and the times for which, the requirements of the following provisions of Chapter 4 are met in relation to the new shares—

• section 287 (the maximum qualifying investment requirement),

• section 289 (the proportion of eligible shares requirement),

• section 290 (the trading requirement),

• section 291 (the carrying on of a qualifying activity requirement),

• [F6 section 292A (the maximum amount raised annually through risk finance investments requirement),

• section 292AA (the maximum amount raised through risk finance investments when relevant holding is issued requirement),

• section 292AB (the maximum risk finance investments during the 5-year post-investment period requirement),]

• section 293 (the use of the money raised requirement),

• section 294 (the relevant company to carry on the relevant qualifying activity requirement),

• [F7 section 294A (the permitted company age requirement),]

• section 296 (the control and independence requirement), F8 ...

• section 297 (the gross assets requirement),F9 ...

• section 297A (the number of employees requirement) [F10 , and

• section 297B (the proportion of skilled employees requirement).]

(2) If the requirements of sections 290 and 291 were met in relation to the old company and any old shares immediately before the beginning of the period for giving effect to the arrangements, then (so far as it would not otherwise be the case) those requirements are treated as being met in relation to the new company and the matching new shares at all times which—

(a) fall in that period, and

(b) do not fall after a time when (apart from the arrangements) those requirements would have ceased by virtue of—

(i) section 291(4) or (5), or

(ii) any cessation of a trade by any company,

to be met in relation to the old company and the matching old shares.

(3) For the purposes of section 291, the period of two years mentioned in subsection (4) of that section is treated, in the case of any new shares, as expiring at the same time as it would have expired (or by virtue of this subsection would have been treated as expiring) in the case of the matching old shares.

(4) Subject to subsection (5), if—

(a) there is an exchange under the arrangements of any new shares for any old shares, and

(b) those old shares are shares in relation to which the requirements of sections [F11 292A, 292AA, 292AB], 293, 294 [F12 , 294A], 297 [F13 , 297A and 297B] were (or were treated as being) met to any extent immediately before the exchange,

those requirements are to be treated, at all times after that time, as met to the same extent in relation to the matching new shares.

[F14 (4A) If—

(a) there is an exchange under the arrangements of any new shares for any old shares,

(b) that exchange occurs during the period of 5 years beginning with the day after the day on which the old shares were issued, and

(c) those old shares are shares in relation to which the requirement of section 292AB (maximum risk finance investments during 5-year post-investment period) applies and is met,

that requirement is to be treated as applying and met in relation to the matching new shares.

(4B) But, where that requirement applies in relation to the old shares, it is met in relation to those shares if (and only if) it would be met were—

(a) the first reference to the relevant company in section 292AB(4), and

(b) the references to the relevant company in section 292AB(5) and (7)(a)(i),

read, in relation to times in that 5 year period which fall at or after the time of the exchange, as references to the new company.

(4C) For the purposes of subsections (4A) and (4B), the requirement in section 292AB is treated as applying in relation to the old shares if condition A or B in that section would be met if references in section 292AB(5) and (7)(a)(i) to the relevant company were read as references to the new company.

(4D) The requirement in section 293 (the use of money raised) is met in relation to the old shares if (and only if) it would be met if references to the relevant company in section 293(5ZA) were read as including a reference to the new company.

(4E) The requirement of section 294A (permitted company age) is met in relation to the old shares if (and only if) it would be met if—

(a) in section 294A(4) the reference to relevant investments made in the relevant company included a reference to relevant investments made in the new company,

(b) in section 294A(6)(d) and (f) the references to the relevant company included a reference to the new company,

(c) in paragraphs (a)(ii) and (b)(iii) of the definition of “the total relevant turnover amount” in section 294A(8) the reference to a company which becomes a 51% subsidiary of the relevant company after the investment date included a reference to a company which becomes a 51% subsidiary of the new company after that date otherwise than as a result of the exchange.

(4F) If—

(a) there is an exchange under the arrangements of any new shares for any old shares,

(b) that exchange occurs during the period of 3 years beginning with the issue of the old shares, and

(c) those old shares are shares in relation to which the requirement of section 297B (proportion of skilled employees requirement) is met,

that requirement is to be treated as met in relation to the matching new shares.

(4G) The requirement of section 297B is met in relation to the old shares if (and only if) it would be met in relation to those shares were references to the relevant company, in subsections (1) and (3) of that section (and, in the definitions of the terms mentioned in subsection (4) as they apply for the purposes of those subsections), read as references to the new company in relation to times in that 3 year period which fall at or after the exchange.]

(5) If there is a time following any exchange under the arrangements of any new shares for any old shares when (apart from the arrangements) the requirement of section 293 would have ceased under—

(a) subsection (1) of that section, or

(b) this subsection,

to be met in relation to those old shares, that requirement ceases at that time to be met in relation to the matching new shares.

(6) For the purposes of section 287, any new shares acquired under the arrangements are to be treated as representing an investment which—

(a) raised the same amount of money as was raised (or, by virtue of this subsection, is treated as having been raised) by the issue of the matching old shares, and

(b) raised that amount by an issue of shares in the new company made at the time when the issue of the matching old shares took place (or, as the case may be, is treated as having taken place).

(7) In determining whether the requirements of section 296 are met in relation to the old company or the new company at a time in the period for giving effect to the arrangements, ignore both—

(a) the arrangements themselves, and

(b) any exchange of new shares for old shares that has already taken place under the arrangements.

(8) For the purposes of section 289, the value of the new shares, both—

(a) immediately after the time of their acquisition, and

(b) immediately after the time of any subsequent relevant event occurring by virtue of the arrangements,

is to be taken to be the same as the value, when last valued in accordance with that section, of the old shares for which they are exchanged.

Textual Amendments

F6 Words in s. 327(1) inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 18(2)(a)

F7 Words in s. 327(1) inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 18(2)(b)

F8 Word in s. 327(1) repealed (19.7.2007) by Finance Act 2007 (c. 11), Sch. 27 Pt. 2(16)

F9 Word in s. 327(1) omitted (18.11.2015) by virtue of Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 18(2)(c)

F10 Words in s. 327(1) inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 18(2)(c)

F11 Words in s. 327(4) inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 18(3)(a)

F12 Words in s. 327(4) inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 18(3)(b)

F13 Words in s. 327(4) substituted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 18(3)(c)

F14 S. 327(4A)-(4G) inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 18(4)

[F15 327A Follow-on funding U.K.

(1) Subsections (2) and (3) apply where—

(a) this section applies (see section 326(1)),

(b) the acquisition by the new company of all the old shares, which is provided for by the arrangements mentioned in section 326(1), takes place, and

(c) the acquisition falls within section 326(2).

(2) If, after the acquisition, another company makes an investment in the new company, section 280C (the permitted maximum age condition) has effect in relation to that investment as if—

(a) in subsection (4)(a) the reference to a relevant investment having been made in the relevant company before the end of the initial investing period included a reference to a relevant investment having been made in the old company before the acquisition and before the end of the initial investing period, and

(b) in subsection (6)(a) the reference to relevant investments made in the relevant company included a reference to relevant investments made in the old company before the acquisition.

(3) In relation to any relevant holding issued by the new company after the acquisition, section 294A (the permitted company age requirement) has effect as if—

(a) in subsection (3)(a) the reference to a relevant investment having been made in the relevant company before the end of the initial investing period included a reference to a relevant investment having been made in the old company before the acquisition and before the end of the initial investing period, and

(b) in subsection (5)(a) the reference to relevant investments made in the relevant company included a reference to relevant investments made in the old company before the acquisition.

(4) In subsection (3) “relevant holding” has the same meaning as in Chapter 4.]

Textual Amendments

F15 S. 327A inserted (with effect in accordance with s. 12(4) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 12(3)

328 Supplementary U.K.

(1) Subject to subsection (2), references in sections 326 and 327 and this section, except in the expression “subscriber shares”, to shares in a company include references to any securities of that company.

(2) For the purposes of subsection (1) a relevant security of the old company is not to be treated as a security of the old company if—

(a) the arrangements do not provide for the acquisition of the security by the new company, or

(b) such treatment prevents section 326(1)(b) from being met in connection with the arrangements.

(3) In subsection (2) “relevant security” means an instrument which is a security for the purposes of Chapter 4 merely because of section 285(2).

(4) References in section 327 to the period for giving effect to the arrangements are references to the period which—

(a) begins with the time when the arrangements first came into existence, and

(b) ends with the time when the new company completes its acquisition under the arrangements of all the old shares.

(5) For the purposes of sections 326 and 327 and this section—

(a) old shares and new shares are of a corresponding description if, were they shares in the same company, they would be of the same description, and

(b) old shares and new shares are matching shares in relation to each other if the old shares are the shares for which the new shares are exchanged under the arrangements.