Corporation Tax Act 2009

Takeovers and transfers of businesses

1022 Takeover of company whose shares are subject to option

(1) This section applies if—

(a) a person (“P”) obtains a qualifying option to acquire shares in a company,

(b) subsequently there is a takeover of that company,

(c) P, by agreement with the acquiring company, releases P’s rights under the qualifying option in consideration of P’s obtaining another option (“the new option”), and

(d) the new option is an option to acquire shares in a qualifying company.

Section 1023 explains what is meant by “qualifying option”, “takeover”, “the acquiring company” and “qualifying company”.

(2) This Chapter applies as if shares acquired pursuant to the new option are acquired pursuant to the qualifying option.

(3) The company whose shares are subject to the new option is a qualifying successor company for the purposes of paragraph (f) of condition 3 in section 1016 (condition relating to shares acquired).

(4) In calculating the amount of any relief resulting from this section—

(a) any consideration given in relation to the obtaining of the new option is treated as consideration given in relation to the obtaining of the qualifying option, and

(b) any consideration given in relation to the acquisition of shares pursuant to the new option is treated as consideration given in relation to the acquisition of shares pursuant to the qualifying option.

The consideration covered by paragraph (a) does not include the consideration mentioned in subsection (1)(c).

1023 Supplementary provision for purposes of section 1022

(1) This section applies for the purposes of section 1022.

(2) An option is a qualifying option if condition 3 in section 1016 would be met in relation to shares acquired pursuant to the option.

(3) There is a takeover of a company when another company (“the acquiring company”) acquires control of it.

(4) The following companies are qualifying companies—

(a) the acquiring company,

(b) a company that, when the takeover occurs, is a parent company of the acquiring company,

(c) a company that, when the takeover occurs, is a member of a consortium that owns the acquiring company,

(d) a company that, when the takeover occurs, is a member of a consortium that owns a parent company of the acquiring company, and

(e) a company within subsection (5).

(5) A company (“company A”) is within this subsection if when the takeover occurs—

(a) the acquiring company or a parent company of the acquiring company is a member of a consortium that owns another company (“company B”), and

(b) company A is—

(i) a member of that consortium or a parent company of a member of that consortium, and

(ii) a member of the same commercial association of companies as company B.

1024 Transfer of qualifying business by group transfers

(1) This section applies in relation to relief to be given under this Chapter if—

(a) during the option period, the whole, or substantially the whole, of the qualifying business is transferred, and

(b) conditions A and B are met.

(2) Condition A is that—

(a) the transfer is a group transfer, or

(b) if there is more than one transfer, all the transfers are group transfers.

(3) Condition B is that, as a result of the transfer or transfers, at the end of the option period—

(a) the whole, or substantially the whole, of the qualifying business is carried on by one company (“the successor company”) only and that company is not the employing company, or

(b) the whole, or substantially the whole, of the qualifying business is carried on by companies (“the successor companies”) none of which is the employing company.

(4) The relief is to be given to—

(a) the successor company, or

(b) whichever one of the successor companies is nominated by them,

instead of the employing company (and references to the employing company in section 1021(3) and (4) are to be read as references to the company to which the relief is to be given).

(5) In this section “the option period” means the period—

(a) beginning when the option is obtained, and

(b) ending when the shares are acquired.