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Finance Act 1960

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This is the original version (as it was originally enacted).

25Transactions between associated dealing companies and other companies

(1)Where after the fifth day of April, nineteen hundred and sixty, and otherwise than in pursuance of an agreement made on or before that day a company, not being a dealing company,—

(a)acquires from an associated company, being a dealing company, any assets being trading stock of the dealing company and not being securities which are shown to have been acquired in pursuance of an offer for sale to the public made by that company and in the allotment of which no preference was given to associated companies, and subsequently disposes of those assets, or

(b)otherwise disposes of an asset to an associated company, being a dealing company,

any profit which the first-mentioned company makes out of the transaction shall be deemed to be income (and, if that company is a company to which section two hundred and forty-five of the Act of 1952 (surtax on undistributed income of certain companies) applies, to be investment income) of that company and chargeable with income tax under Case VI of Schedule D:

Provided that where, in the case of any such acquisition of assets by a company as is mentioned in paragraph (a) of this subsection or any such disposal of assets by a company as is mentioned in paragraph (b) thereof, the assets fall by virtue of a direction under section four hundred and sixty-nine of the Act of 1952 (sales etc. between associated persons) to be treated in computing the profits of the other associated company for income tax purposes as having been sold for a price other than that actually paid, the foregoing provisions of this subsection shall have effect as if the assets had been acquired or, as the case may be, disposed of for that other price instead of for the price actually paid for them.

(2)Where the disposal by the first-mentioned company of the assets; acquired from the dealing company is to another associated company, and that company is not a dealing company, then that company and any other associated company subsequently acquiring the asset shall be treated for the purposes of paragraph (a) of the foregoing subsection as if it had acquired the asset from an associated company being a dealing company:

Provided that this subsection shall not by virtue of the said disposal apply to any acquisition after the asset has been acquired by an associated company being a dealing company or by a person not being an associated company.

(3)Where a company, not being a dealing company, acquires as mentioned in paragraph (a) of subsection (1) of this section any assets being shares in or debentures of a body corporate, or by virtue of subsection (2) of this section falls to be treated as if it had so acquired any such assets, and shares in or debentures of the same or any other body corporate are issued, or any right to acquire any such shares or debentures is granted, to the company as the holder of the first mentioned shares or debentures, the company shall be treated for the purposes of the said paragraph (a) as if it had acquired the shares or debentures so issued, or the right granted, from an associated company being a dealing company. In this subsection the reference to an issue being made or right being granted to the company as the holder of shares or debentures shall be taken to include any case in which an issue or grant is made to the company as having been the holder of those shares or debentures, or is made to it in pursuance of an offer or invitation made to it as being or having been the holder of those shares or debentures, or of an offer or invitation in connection with which any preference is given to it as being or having been the holder thereof.

(4)Where a dealing company becomes entitled to a deduction, in computing the profits or gains of the company for income tax purposes for a period ending after the fifth day of April, nineteen hundred and sixty, in respect of the depreciation in the value of any right subsisting against an associated company, not being a dealing company, or where a dealing company makes any payment to such an associated company, being a payment in respect of which the dealing company is entitled to a deduction in computing its profits or gains as aforesaid, and the depreciation or payment is not brought into account in computing the profits or gains of the company not being a dealing company, that company shall be deemed to have received on the last day of the period income of an amount equal to the amount of the deduction and shall be chargeable in respect thereof under Case VI of Schedule D:

Provided that—

(a)where the company not being a dealing company is carrying on a trade, the said income shall, if the company so elects, not be so chargeable but shall be deemed to have been a receipt of the trade, or, if the company is carrying on more than one trade, to have been a receipt of such one of the trades as the company may choose, and, if the company is an Overseas Trade Corporation, to have been trading income;

(b)where the said company is carrying on, or was formed to carry on, a trade, then if the said right subsisting against the company was a right to the repayment of moneys lent for meeting expenditure which has proved (in whole or in part) abortive, or the payment to the company was made for meeting such expenditure, and the expenditure is such that the company is not entitled in respect thereof to any allowance or deduction in computing losses or gains, this subsection shall not apply in so far as the expenditure proved abortive.

(5)Where an investment company is in liquidation, and the liquidator effects any disposal of an asset in respect of which the company would have been chargeable under subsection (1) of this section if the disposal had been effected by the company, the liquidator shall be chargeable with tax in like manner and to the like extent, and the profit in respect of which he is so chargeable shall be deemed to be income of the company arising since the commencement of the winding up.

(6)Any loss which a company, not being a dealing company, sustains in any transaction falling within subsection (1) of this section by virtue of paragraph (a) thereof shall be treated as being a loss to which section three hundred and forty-six of the Act of 1952 (relief in respect of losses in transactions the profits of which would be chargeable under Case VI of Schedule D) applies, so however that relief under that section for any loss to which that section applies by virtue of this subsection shall be given only to the extent that that loss can be deducted from or set off against profits arising from other transactions falling within subsection (1) of this section by virtue of paragraph (a) thereof.

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