Corporation Tax Act 2009

Chapter 10 U.K. European cross-border mergers

Introduction U.K.

682 Introduction to Chapter U.K.

(1) This Chapter applies if the following conditions are met—

(a) conditions A to D,

(b) in the case of a merger within subsection (2)(a), (b) or (c), condition E, and

(c) in the case of a merger within subsection (2)(c) or (d), condition F,

but see section 686 (tax avoidance etc) and section 687 (disapplication of Chapter where transparent entities involved).

(2) Condition A is that—

(a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) No. 2157/2001 on the Statute for a European company (Societas Europaea),

(b) an SCE is formed by the merger of two or more co-operative societies, at least one of which is a society registered under [F1 the Co-operative and Community Benefit Societies Act 2014], in accordance with Articles 2(1) and 19 of Council Regulation (EC) No. 1435/2003 on the Statute for a European Co-operative Society (SCE),

(c) a merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or

(d) a merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures.

(3) Condition B is that each merging company is resident in a [F2 relevant state].

(4) Condition C is that the merging companies are not all resident in the same [F3 relevant state].

(5) Condition D is that immediately after the merger the transferee is within the charge to corporation tax.

(6) Condition E is that—

(a) the transfer of assets and liabilities to the transferee in the course of the merger is made in exchange for the issue of shares or debentures by the transferee to each person holding shares in or debentures of a transferor, or

(b) that transfer is not so made only because, and only so far as, the transferee is prevented from so issuing such shares or debentures by section 658 of the Companies Act 2006 (c. 46) (general rule against limited company acquiring own shares) or by a corresponding provision of the law of [F4 a] member State preventing such an issue.

(7) Condition F is that in the course of the merger each transferor ceases to exist without being in liquidation (within the meaning given by section 247 of the Insolvency Act 1986 (c. 45)).

(8) In this Chapter,

[F5 (a)] “the merger” and “the merging companies” have the same meaning as in this section

[F6 (b) “relevant state” means the United Kingdom or a member State.]

(9) See—

(a) section 683 for the meaning of “the transferee” and “transferor”, and

(b) section 688 for the meaning of “company”, “co-operative society” and “resident in a [F7 relevant state]”.

Textual Amendments

F1 Words in Act substituted (1.8.2014) by virtue of Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 142 (with Sch. 5)

F2 Words in s. 682(3) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(14)(a) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F3 Words in s. 682(4) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(14)(b) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F4 Word in s. 682(6)(b) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(14)(c) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F5 Words in s. 682(8) renumbered as s. 682(8)(a) (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(14)(d)(i) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F6 S. 682(8)(b) inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(14)(d)(ii) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F7 Words in s. 682(9)(b) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(14)(e) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

683 Meaning of “the transferee” and “transferor” U.K.

(1) In this Chapter, “the transferee” means—

(a) in relation to a merger within section 682(2)(a), the SE,

(b) in relation to a merger within section 682(2)(b), the SCE, and

(c) in relation to a merger within section 682(2)(c) or (d), the company to which assets and liabilities are transferred.

(2) In this Chapter “transferor” means—

(a) in relation to a merger within section 682(2)(a), a company merging to form the SE,

(b) in relation to a merger within section 682(2)(b), a co-operative society merging to form the SCE, and

(c) in relation to a merger within section 682(2)(c) or (d), a company transferring all of its assets and liabilities.

Transfers of derivative contracts at notional carrying value U.K.

684 Transfer of derivative contract at notional carrying value U.K.

(1) This section applies if in the course of the merger a transferor transfers the rights and liabilities under a derivative contract to the transferee.

(2) For the purpose of determining the credits and debits to be brought into account in respect of the derivative contract in accordance with this Part, the transferor and the transferee are treated as having entered into the transfer of those rights and liabilities for consideration of an amount equal to the notional carrying value of the contract.

(3) For the purposes of this section, the notional carrying value of a contract is the amount which would have been [F8 its tax-adjusted carrying value based on] the accounts of the transferor if a period of account had ended immediately before the date when the transferor ceased to be a party to the contract.

(4) This section is subject to section 685 (transferor using fair value accounting).

Textual Amendments

F8 Words in s. 684(3) substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 88

685 Transferor using fair value accounting U.K.

(1) This section applies instead of section 684 if, in a case where that section would otherwise apply, the transferor uses fair value accounting as respects the derivative contract.

(2) The amount which is to be brought into account by the transferor in respect of the transfer of the rights and liabilities mentioned in section 684(1) is the fair value of the derivative contract as at the date of transfer to the transferee.

(3) For any accounting period in which the transferee is a party to the derivative contract, for the purpose of determining the credits and debits to be brought into account in respect of the contract in accordance with this Part, the transferee is treated as if it had acquired the contract for consideration of an amount equal to the fair value of the contract as at the date of transfer to it.

Exception for tax avoidance cases and clearances U.K.

686 Tax avoidance etc U.K.

(1) This Chapter does not apply in relation to the merger if—

(a) the merger is not effected for genuine commercial reasons, or

(b) the merger forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax.

(2) But subsection (1) does not prevent this Chapter from applying if before the merger—

(a) any of the merging companies has applied to the Commissioners for Her Majesty's Revenue and Customs, and

(b) the Commissioners have notified the merging companies that they are satisfied that subsection will not have that effect.

(3) Sections 678 and 679 have effect in relation to subsection (2) as in relation to section 677(2), taking the references in section 679 to section 677(2)(b) as references to subsection (2)(b) of this section.

Transparent entities U.K.

687 Disapplication of Chapter where transparent entities involved U.K.

(1) This section applies if one or more of the merging companies is a transparent entity.

(2) If as a result of the merger the assets and liabilities of a transparent entity are transferred to another company, this Chapter does not apply in relation to the transfer.

(3) In this section “transparent entity” means a company which is resident in a member State F9 ... and which does not have an ordinary share capital.

Textual Amendments

F9 Words in s. 687(3) omitted (31.12.2020) by virtue of The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(15) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

Interpretation U.K.

688 Interpretation U.K.

(1) In this Chapter—

• “company” means any entity listed as a company in [F10 Part A of Annex I] to the Mergers Directive, and

• “co-operative society” means a society registered under [F1 the Co-operative and Community Benefit Societies Act 2014] or a similar society governed by the law of a member State F11 ....

(2) For the purposes of this Chapter, a company is resident in a [F12 relevant state] if—

(a) it is within a charge to tax under the law of the [F13 relevant state] as being resident for that purpose, and

(b) it is not regarded, for the purpose of any double taxation relief arrangements to which the [F13 relevant state] is a party, as resident in a territory not within a [F12 relevant state].

Textual Amendments

F1 Words in Act substituted (1.8.2014) by virtue of Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 142 (with Sch. 5)

F10 Words in s. 688(1) substituted (1.7.2011) by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2011 (S.I. 2011/1431), regs. 1(2), 4(5)

F11 Words in s. 688(1) omitted (31.12.2020) by virtue of The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(16)(a) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F12 Words in s. 688(2) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(16)(b)(i) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F13 Words in s. 688(2) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(16)(b)(ii) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)