195AOil 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.

195BLicence-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—

$\mathrm{DDC}\times \genfrac{}{}{0.1ex}{}{\mathrm{A}}{\mathrm{TA}}$

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).

195CCompany 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—

$\mathrm{N}-\mathrm{C}$

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—

$\left(\mathrm{N}-\mathrm{C}\right)\times \genfrac{}{}{0.1ex}{}{\mathrm{A}}{\mathrm{TA}}$

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.

195DCompany 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—

$\mathrm{C}-\mathrm{N}$

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—

$\left(\mathrm{C}-\mathrm{N}\right)\times \genfrac{}{}{0.1ex}{}{\mathrm{D}}{\mathrm{TD}}$

where—

• D is the value of the licence disposed of, and

• TD is total value of all the licences disposed of.

195ECompany 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—

$\mathrm{N}+\mathrm{C}$

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—

$\left(\mathrm{N}+\mathrm{C}\right)\times \genfrac{}{}{0.1ex}{}{\mathrm{A}}{\mathrm{TA}}$

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.