Corporation Tax Act, 1976

Group relief: effect of arrangements for transfer of company to another group, etc.

120.—(1) If, apart from this section, two companies (in this subsection referred to as “the first company” and “the second company”) would be treated as members of the same group of companies and—

(a) in an accounting period which begins on or after the 6th day of April, 1976, one of the two companies has trading losses or other amounts eligible for relief from corporation tax which it would, apart from this section, be entitled to surrender as mentioned in section 107 (1), and

(b) arrangements are in existence by virtue of which, at some time during or after the expiry of that accounting period,—

(i) the first company or any successor of it could cease to be a member of the same group of companies as the second company and could become a member of the same group of companies as a third company, or

(ii) any person has or could obtain, or any persons together have or could obtain, control of the first company but not of the second, or

(iii) a third company could begin to carry on the whole or any part of a trade which, at any time in that accounting period, is carried on by the first company and could do so either as a successor of the first company or as a successor of another company which is not a third company but which, at some time during or after the expiry of that accounting period, has begun to carry on the whole or any part of that trade,

then, for the purposes of this Part, the first company shall be treated as not being a member of the same group of companies as the second company.

(2) If a trading company is owned by a consortium or is a 90 per cent. subsidiary of a holding company which is owned by a consortium and—

(a) in any accounting period which begins on or after the 6th day of April, 1976, the trading company has trading losses or other amounts eligible for relief from corporation tax which it would, apart from this section, be entitled to surrender as mentioned in section 107 (1), and

(b) arrangements are in existence by virtue of which—

(i) the trading company or any successor of it could, at some time during or after the expiry of that accounting period, become a 75 per cent. subsidiary of a third company, or

(ii) any person who owns, or any persons who together own, less than 50 per cent. of the ordinary share capital of the trading company has or together have, or could at some time during or after the expiry of that accounting period obtain, control of the trading company, or

(iii) any person, other than a holding company of which the trading company is a 90 per cent. subsidiary, either alone or together with connected persons, holds or could obtain, or controls or could control the exercise of not less than 75 per cent. of the votes which may be cast on a poll taken at a general meeting of the trading company in that accounting period or in any subsequent accounting period, or

(iv) a third company could begin to carry on, at some time during or after the expiry of that accounting period, the whole or any part of a trade which, at any time in that accounting period, is carried on by the trading company and could do so either as a successor of the trading company or as a successor of another company which is not a third company but which, at some time during or after the expiry of that accounting period, has begun to carry on the whole or any part of that trade,

then, for the purposes of this Part, the trading company shall be treated as though it did not (as the surrendering company) fall within section 107 (2) (a) (b) (c).

(3) In any case where a trading company is a 90 per cent. subsidiary of a holding company which is owned by a consortium, any reference in subsection (2) to the trading company, other than a reference in paragraph (b) (iv) thereof, shall be construed as including a reference to the holding company.

(4) In this section “third company” means a company which, apart from any provision made by or under any such arrangements as are specified in either subsection (1) (b) or (2), is not a member of the same group of companies as the first company, within the meaning of subsection (1), or, as the case may be, the trading company or holding company to which subsection (2) applies.

(5) In subsections (1) and (2)—

“connected persons” shall be construed in accordance with section 157, and “control” has the meaning assigned to it by section 158.

(6) For the purposes of subsections (1) and (2) a company is a successor of another if it carries on a trade which, in whole or in part, the other company has ceased to carry on and the circumstances are such that—

(a) section 20 (company reconstructions without change of ownership) applies in relation to the two companies as the predecessor and the successor within the meaning of that section, or

(b) the two companies are connected with each other within the terms of section 157.