Section 139 | Reconstruction ... involving transfer of business.

(1)Subject to the provisions of this section, where—

(a)any scheme of reconstruction ... involves the transfer of the whole or part of a company’s business to another company, and^F1

(b)the conditions in subsection (1A) below are met in relation to the assets included in the transfer, and^F2

(c)the first-mentioned company receives no part of the consideration for the transfer (otherwise than by the other company taking over the whole or part of the liabilities of the business),

then, so far as relates to corporation tax on chargeable gains, the 2 companies shall be treated as if any assets included in the transfer were acquired by the one company from the other company for a consideration of such amount as would secure that on the disposal by way of transfer neither a gain nor a loss would accrue to the company making the disposal, and for the purposes of Schedule 2 the acquiring company shall be treated as if the respective acquisitions of the assets by the other company had been the acquiring company’s acquisition of them.

(1A)The conditions referred to in subsection (1)(b) above are—^F3F4

(a)that the company acquiring the assets is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets ... in relation to that company immediately after that time, and^F3F5

(b)that the company from which the assets are acquired is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets ... in relation to that company immediately before that time.^F3F6

For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain chargeable to corporation tax as a result of section 2B(3) or (4).

(1AA)Repealed^F7

(1B)Nothing in section 179(3D) prevents the two companies being treated as mentioned in subsection (1).^F8

(2)This section does not apply in relation to an asset which, until the transfer, formed part of trading stock of a trade carried on by the company making the disposal, or in relation to an asset which is acquired as trading stock for the purposes of a trade carried on by the company acquiring the asset.Section 170(1) applies for the purposes of this subsection.

(3)Repealed^F9

(4)This section does not apply in the case of a transfer of the whole or part of a company’s business to a unit trust scheme to which section 100(2) applies or which is an authorised unit trust or to an investment trust or a venture capital trust.^F10

(4A)Subsection (4B) applies in respect of arrangements relating to a reconstruction as regards which this section applies if the main purpose, or one of the main purposes, of the arrangements is to reduce or avoid liability to capital gains tax, corporation tax or income tax.^F11

(4B)Any such reduction or avoidance that would (in the absence of this subsection) arise from such arrangements is to be counteracted by the making of such adjustments as are just and reasonable (in light of the reduction or avoidance).^F11

(4C)This includes, in an appropriate case, disapplying this section insofar as is required to counteract the reduction or avoidance.^F11

(4D)Any adjustments required to be made under subsection (4B) (whether or not by an officer of Revenue and Customs) may be made by way of—^F11

(a)an assessment, or^F11

(b)the modification of an assessment.^F11

(5)Subsections (4A) to (4D) do not apply in any case where, before the transfer, the Board have, on the application of the acquiring company, notified the company that the Board are satisfied that the reconstruction ... will be effected without arrangements in respect of which subsection (4B) applies. Subsections (2) to (5) of section 138 shall have effect in relation to this subsection as they have effect in relation to subsection (1) of that section.^F12F13F14

(6)Where, if the company making the disposal had not been wound up, tax could have been assessed on it by virtue of subsection (4B) above, that tax may be assessed and charged (in the name of the company making the disposal) on the company to which the disposal is made.^F15

(7)If any tax assessed on a company (“the chargeable company”) by virtue of subsection (4B) or (6) above is not paid within 6 months from the date when it is payable, any other person who—^F16

(a)holds all or any part of the assets in respect of which the tax is charged; and

(b)either is the company to which the disposal was made or has acquired the assets without there having been any subsequent disposal not falling within this section or section 171,

may, within 2 years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or, as the case may be, a corresponding part of the unpaid tax; and a person paying any amount of tax under this section shall be entitled to recover a sum of that amount from the chargeable company.

(8)With respect to chargeable gains accruing in chargeable periods ending after such day as the Treasury may by order appoint, in subsection (7) above—

(a)for the words “when it is payable" there shall be substituted “ when it is due and payable or, if later, the date when the assessment is made on the company ”;

(b)for the words “the time when the tax became payable" there shall be substituted “ the later of those dates ”; and

(c)for the words “a sum" onwards there shall be substituted “ from the chargeable company a sum equal to that amount together with any interest paid by him under section 87A of the Management Act on that amount ”.

(9)In this section “scheme of reconstruction” has the same meaning as in section 136.^F17

(10)In this section, “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).^F18