CG45711 | ETMD: the effect of section 140E

Where the criteria within TCGA 1992 section 140E are met, see CG45706 - CG45710, section 140E(3) provides that at the asset tier qualifying assets are to be treated as acquired by the transferee for a consideration resulting in neither a gain nor a loss on the transferor.

Section 140E(4) - (6) provides the meaning of ‘qualifying transferred asset’.

Section 140E(4) provides that the asset must be transferred to the transferee as part of the process of the merger and subsections (5) and (6) must be satisfied in respect of that asset.

Under section 140E(5) the requirement is that at the time of the transfer the transferor is resident in the UK or any gain that would have accrued to the transferor on a disposal immediately before the transfer would have been a chargeable gain within section 10B. See CG42100+.

Under section 140E(6) the requirement is that at the time of the transfer the transferee is resident in the UK or any gain that would accrue to the transferee on a disposal immediately after the transfer would be a chargeable gain within section 10B. See CG42100+.

If section 140E(2)(d)(ii) applies to allow for the situation where the parent as the transferee is unable to issue shares to itself, then section 140E(7) provides that neither section 22 nor section 124 apply. See CG45710 and CG45704 but note that absent section 140E(7) section 24 would have applied on the extinction of the shares or debentures.