Section 1066 | Exception for certain transfers between UK resident companies

(1)Section 1064 does not apply if the company and the participator are both UK resident and—

(a)one is a 51% subsidiary of the other or both are 51% subsidiaries of a third company which is also UK resident, and

(b)the benefit to the participator arises on a transfer of assets or liabilities—

(i)by the company to the participator, or

(ii)to the company by the participator,

or in connection with such a transfer.

(2)In determining whether one body corporate (“A”) is a 51% subsidiary of another (“B”) for the purposes of subsection (1), B is treated as not being the owner of—

(a)any share capital which it owns directly in a body corporate as trading stock,

(b)any share capital which it owns indirectly, and which is owned directly by a body corporate as trading stock, or

(c)any share capital which it owns directly or indirectly in a body corporate that is not UK resident.

(3)For the purposes of subsection (2) share capital owned by a body is owned as trading stock if (and only if) a profit on the sale of the shares would be treated as a trading receipt of the body's trade.