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Finance Bill
Schedule 7 — Stamp duty land tax: group relief and reconstruction and acquisition reliefs
Part 1 — Group relief

    177

 

              (a)             the vendor, or

              (b)             another company that as a result of the transaction ceases to be a

member of the same group as the purchaser.

          (4)      The second case is where the purchaser ceases to be a member of the same

group as the vendor by reason of anything done for the purposes of, or in the

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course of, winding up the vendor or another company that is above the

vendor in the group structure.

          (5)      For this purpose a company is “above” the vendor in the group structure if

the vendor, or another company that is above the vendor in the group

structure, is a 75% subsidiary of the company.

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          (6)      The third case is where—

              (a)             the purchaser ceases to be a member of the same group as the vendor

as a result of an acquisition of shares by another company (“the

acquiring company”) in relation to which—

                    (i)                   section 75 of the Finance Act 1986 (c. 41) applies (stamp duty:

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acquisition relief), and

                    (ii)                  the conditions for relief under that section are met,

                              and

              (b)             the purchaser is immediately after that acquisition a member of the

same group as the acquiring company.

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          (7)      But if in a case within sub-paragraph (6)—

              (a)             the purchaser ceases to be a member of the same group as the

acquiring company—

                    (i)                   before the end of the period of three years beginning with the

effective date of the relevant transaction, or

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                    (ii)                  in pursuance of, or in connection with, arrangements made

before the end of that period,

                              and

              (b)             at the time the purchaser ceases to be a member of the same group as

the acquiring company, it or a relevant associated company holds a

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chargeable interest—

                    (i)                   that was acquired by the purchaser under the relevant

transaction, or

                    (ii)                  that is derived from an interest so acquired,

                              and that has not subsequently been acquired at market value under

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a chargeable transaction for which group relief was available but was

not claimed,

                   the provisions of this Part relating to group relief apply as if the purchaser

had then ceased to be a member of the same group as the vendor.

          (8)      In sub-paragraph (7)—

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               “arrangements” includes any scheme, agreement or understanding,

whether or not legally enforceable; and

               “relevant associated company”, in relation to the purchaser, means a

company that is a member of the same group as the purchaser that

ceases to be a member of the same group as the acquiring company

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in consequence of the purchaser so ceasing.

 

 

Finance Bill
Schedule 7 — Stamp duty land tax: group relief and reconstruction and acquisition reliefs
Part 1 — Group relief

    178

 

Recovery of group relief from another group company or controlling director

  5       (1)      This paragraph applies where—

              (a)             tax is chargeable under paragraph 3 (withdrawal of group relief),

              (b)             the amount so chargeable has been finally determined, and

              (c)             the whole or part of the amount so chargeable is unpaid six months

5

after the date on which it became payable.

          (2)      The following persons may, by notice under paragraph 6, be required to pay

the unpaid tax—

              (a)             the vendor;

              (b)             any company that at any relevant time was a member of the same

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group as the purchaser and was above it in the group structure;

              (c)             any person who at any relevant time was a controlling director of the

purchaser or a company having control of the purchaser.

          (3)      For the purposes of sub-paragraph (2)(b)—

              (a)             a “relevant time” means any time between the effective date of the

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relevant transaction and the purchaser ceasing to be a member of the

same group as the vendor; and

              (b)             a company (“company A”) is “above” another company (“company

B”) in a group structure if company B, or another company that is

above company B in the group structure, is a 75% subsidiary of

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company A.

          (4)      In sub-paragraph (2)(c)—

               “director”, in relation to a company, has the meaning given by section

67(1) of the Income Tax (Earnings and Pensions) Act 2003 (c. 1)

(read with subsection (2) of that section) and includes any person

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falling within section 417(5) of the Taxes Act 1988 (read with

subsection (6) of that section); and

               “controlling director”, in relation to a company, means a director of

the company who has control of it (construing control in

accordance with section 416 of the Taxes Act 1988).

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Recovery of group relief: supplementary

  6       (1)      The Inland Revenue may serve a notice on a person within paragraph 5(2)

above requiring him within 30 days of the service of the notice to pay the

amount that remains unpaid.

          (2)      Any such notice must be served before the end of the period of three years

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beginning with the date of the final determination mentioned in paragraph

5(1)(b).

          (3)      The notice must state the amount required to be paid by the person on whom

the notice is served.

          (4)      The notice has effect—

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              (a)             for the purposes of the recovery from that person of the amount

required to be paid and of interest on that amount, and

              (b)             for the purposes of appeals,

                   as if it were a notice of assessment and that amount were an amount of tax

due from that person.

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Finance Bill
Schedule 7 — Stamp duty land tax: group relief and reconstruction and acquisition reliefs
Part 2 — Reconstruction and acquisition reliefs

    179

 

          (5)      A person who has paid an amount in pursuance of a notice under this

paragraph may recover that amount from the purchaser.

          (6)      A payment in pursuance of a notice under this paragraph is not allowed as

a deduction in computing any income, profits or losses for any tax purpose.

Part 2

5

Reconstruction and acquisition reliefs

Reconstruction relief

  7       (1)      Where—

              (a)             a company (“the acquiring company”) acquires the whole or part of

the undertaking of another company (“the target company”) in

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pursuance of a scheme for the reconstruction of the target company,

and

              (b)             the first, second and third conditions specified below are met,

                   a land transaction entered into for the purposes of or in connection with the

transfer of the undertaking or part is exempt from charge.

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                   Relief under this paragraph is referred to in this Part as “reconstruction

relief”.

          (2)      The first condition is that the consideration for the acquisition consists

wholly or partly of the issue of non-redeemable shares in the acquiring

company to all the shareholders of the target company.

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                   “Non-redeemable shares” means shares that are not redeemable shares.

          (3)      Where the consideration for the acquisition consists partly of the issue of

non-redeemable shares as mentioned in the first condition, that condition is

met only if the rest of the consideration consists wholly of the assumption or

discharge by the acquiring company of liabilities of the target company.

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          (4)      The second condition is that after the acquisition has been made—

              (a)             each shareholder of each of the companies is a shareholder of the

other, and

              (b)             the proportion of shares of one of the companies held by any

shareholder is the same, or as nearly as may be the same, as the

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proportion of shares of the other company held by that shareholder.

          (5)      The third condition is that the acquisition is effected for bona fide

commercial reasons and does not form part of a scheme or arrangement of

which the main purpose, or one of the main purposes, is the avoidance of

liability to tax.

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                   “Tax” here means stamp duty, income tax, corporation tax, capital gains tax

or tax under this Part.

          (6)      This paragraph is subject to paragraph 9 (withdrawal of reconstruction or

acquisition relief).

Acquisition relief

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  8       (1)      Where—

              (a)             a company (“the acquiring company”) acquires the whole or part of

the undertaking of another company (“the target company”), and

              (b)             the first and second conditions specified below are met,

 

 

Finance Bill
Schedule 7 — Stamp duty land tax: group relief and reconstruction and acquisition reliefs
Part 2 — Reconstruction and acquisition reliefs

    180

 

                   the rate of tax chargeable on a land transaction entered into for the purposes

of or in connection with the transfer of the undertaking or part is limited to

0.5%.

                   Relief under this paragraph is referred to in this Part as “acquisition relief”.

          (2)      The first condition is that the consideration for the acquisition consists

5

wholly or partly of the issue of non-redeemable shares in the acquiring

company to—

              (a)             the target company, or

              (b)             all or any of the target company’s shareholders.

                   “Non-redeemable shares” means shares that are not redeemable shares.

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          (3)      Where the consideration for the acquisition consists partly of the issue of

non-redeemable shares as mentioned in the first condition, that condition is

met only if the rest of the consideration consists wholly of—

              (a)             cash not exceeding 10% of the nominal value of the non-redeemable

shares so issued, or

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              (b)             the assumption or discharge by the acquiring company of liabilities

of the target company, or

              (c)             both of those things.

          (4)      The second condition is that the acquiring company is not associated with

another company that is a party to arrangements with the target company

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relating to shares of the acquiring company issued in connection with the

transfer of the undertaking or part.

          (5)      For this purpose—

              (a)             companies are associated if one has control of the other or both are

controlled by the same person or persons, and

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              (b)             “arrangements” includes any scheme, agreement or understanding,

whether or not legally enforceable.

                   The reference in paragraph (a) to control shall be construed in accordance

with section 416 of the Taxes Act 1988.

          (6)      This paragraph is subject to paragraph 9 (withdrawal of reconstruction or

30

acquisition relief).

Withdrawal of reconstruction or acquisition relief

  9       (1)      Where in the case of a transaction (“the relevant transaction”) that is exempt

by virtue of reconstruction relief or is subject to a reduced rate of tax by

virtue of acquisition relief—

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              (a)             control of the acquiring company changes—

                    (i)                   before the end of the period of three years beginning with the

effective date of the transaction, or

                    (ii)                  in pursuance of, or in connection with, arrangements made

before the end of that period,

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                              and

              (b)             at the time control of the acquiring company changes (“the relevant

time”), it or a relevant associated company holds a chargeable

interest—

                    (i)                   that was acquired by the acquiring company under the

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relevant transaction, or

                    (ii)                  that is derived from an interest so acquired,

 

 

Finance Bill
Schedule 7 — Stamp duty land tax: group relief and reconstruction and acquisition reliefs
Part 2 — Reconstruction and acquisition reliefs

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                              and that has not subsequently been acquired at market value under

a chargeable transaction in relation to which reconstruction or

acquisition relief was available but was not claimed,

                   reconstruction or acquisition relief in relation to the relevant transaction, or

an appropriate proportion of it, is withdrawn and tax is chargeable in

5

accordance with this paragraph.

          (2)      The amount chargeable is the tax that would have been chargeable in respect

of the relevant transaction but for reconstruction or acquisition relief if the

chargeable consideration for that transaction had been an amount equal to

the market value of the subject matter of the transaction or, as the case may

10

be, an appropriate proportion of the tax that would have been so chargeable.

          (3)      In sub-paragraphs (1) and (2) “an appropriate proportion” means an

appropriate proportion having regard to the subject-matter of the relevant

transaction and what is held at the relevant time by the acquiring company

or, as the case may be, by that company and any relevant associated

15

companies.

          (4)      In this paragraph “relevant associated company”, in relation to the acquiring

company, means a company—

              (a)             that is controlled by the acquiring company immediately before the

control of that company changes, and

20

              (b)             of which control changes in consequence of the change of control of

that company.

          (5)      In this paragraph—

              (a)             “arrangements” includes any scheme, agreement or understanding,

whether or not legally enforceable;

25

              (b)             “control” shall be construed in accordance with section 416 of the

Taxes Act 1988; and

              (c)             references to control of a company changing are to the company

becoming controlled—

                    (i)                   by a different person,

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                    (ii)                  by a different number of persons, or

                    (iii)                 by two or more persons at least one of whom is not the

person, or one of the persons, by whom the company was

previously controlled.

          (6)      This paragraph has effect subject to paragraph 10 (cases in which

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reconstruction or acquisition relief not withdrawn).

Cases in which reconstruction or acquisition relief not withdrawn

  10      (1)      Reconstruction or acquisition relief is not withdrawn under paragraph 9 in

the following cases.

          (2)      The first case is where control of the acquiring company changes as a result

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of a share transaction that is effected as mentioned in any of paragraphs (a)

to (d) of paragraph 3 of Schedule 3 (transactions in connection with divorce

etc).

          (3)      The second case is where control of the acquiring company changes as a

result of a share transaction that—

45

              (a)             is effected as mentioned in paragraph 4(1) of Schedule 3, and

 

 

Finance Bill
Schedule 7 — Stamp duty land tax: group relief and reconstruction and acquisition reliefs
Part 2 — Reconstruction and acquisition reliefs

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              (b)             meets the conditions in paragraph 4(2) of that Schedule (variation of

testamentary dispositions etc).

          (4)      The third case is where control of the acquiring company changes as a result

of an exempt intra-group transfer.

                   An “exempt intra-group transfer” means a transfer of shares effected by an

5

instrument that is exempt from stamp duty by virtue of section 42 of the

Finance Act 1930 (c. 28) or section 11 of the Finance Act (Northern Ireland)

1954 (c. 23 (N. I.)) (transfers between associated bodies corporate).

                   But see paragraph 11 (withdrawal of relief in case of subsequent non-exempt

transfer).

10

          (5)      The fourth case is where control of the acquiring company changes as a

result of a transfer of shares to another company in relation to which share

acquisition relief applies.

                   “Share acquisition relief” means relief under section 77 of the Finance Act

1986 (c. 41) and a transfer is one in relation to which that relief applies if an

15

instrument effecting the transfer is exempt from stamp duty by virtue of that

provision.

                   But see paragraph 11 (withdrawal in case of subsequent non-exempt

transfer).

          (6)      The fifth case is where—

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              (a)             control of the acquiring company changes as a result of a loan

creditor becoming, or ceasing to be, treated as having control of the

company, and

              (b)             the other persons who were previously treated as controlling the

company continue to be so treated.

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                   “Loan creditor” here has the meaning given by section 417(7) to (9) of the

Taxes Act 1988.

Withdrawal of reconstruction or acquisition relief on subsequent non-exempt transfer

  11      (1)      Where paragraph 10(4) (change of control of acquiring company as a result

of exempt intra-group transfer) has effect to prevent the withdrawal of

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reconstruction or acquisition relief on a change of control of the acquiring

company, but—

              (a)             a company holding shares in the acquiring company to which the

exempt intra-group transfer related, or that are derived from shares

to which that transfer related, ceases to be a member of the same

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group as the target company—

                    (i)                   before the end of the period of three years beginning with the

effective date of the relevant transaction, or

                    (ii)                  in pursuance of or in connection with arrangements made

before the end of that period,

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                              and

              (b)             the acquiring company or a relevant associated company, at that

time (“the relevant time”), holds a chargeable interest—

                    (i)                   that was transferred to the acquiring company by the

relevant transaction, or

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                    (ii)                  that is derived from an interest that was so transferred,

 

 

Finance Bill
Schedule 7 — Stamp duty land tax: group relief and reconstruction and acquisition reliefs
Part 2 — Reconstruction and acquisition reliefs

    183

 

                              and that has not subsequently been transferred at market value by a

chargeable transaction in relation to which reconstruction or

acquisition relief was available but was not claimed,

                   reconstruction or acquisition relief in relation to the relevant transaction, or

an appropriate proportion of it, is withdrawn and tax is chargeable in

5

accordance with this paragraph.

          (2)      Where paragraph 10(5) (change of control of acquiring company as a result

of a transfer to which share acquisition relief applies) has effect to prevent

the withdrawal of reconstruction or acquisition relief on a change of control

of the acquiring company, but—

10

              (a)             control of the other company mentioned in that provision changes—

                    (i)                   before the end of the period of three years beginning with the

effective date of the relevant transaction, or

                    (ii)                  in pursuance of or in connection with arrangements made

before the end of that period,

15

                              at a time when that company holds any shares transferred to it by the

exempt transfer, or any shares derived from shares so transferred,

                              and

              (b)             the acquiring company or a relevant associated company, at that

time (“the relevant time”), holds a chargeable interest—

20

                    (i)                   that was transferred to the acquiring company by the

relevant transaction, or

                    (ii)                  that is derived from an interest that was so transferred,

                              and that has not subsequently been transferred at market value by a

chargeable transaction in relation to which reconstruction or

25

acquisition relief was available but was not claimed,

                   reconstruction or acquisition relief in relation to the relevant transaction, or

an appropriate proportion of it, is withdrawn and tax is chargeable in

accordance with this paragraph.

          (3)      The amount chargeable is the tax that would have been chargeable in respect

30

of the relevant transaction but for reconstruction or acquisition relief if the

chargeable consideration for that transaction had been an amount equal to

the market value of the subject matter of the transaction or, as the case may

be, an appropriate proportion of the tax that would have been so chargeable.

          (4)      In sub-paragraphs (1), (2) and (3) “an appropriate proportion” means an

35

appropriate proportion having regard to the subject-matter of the relevant

transaction and what is held at the relevant time by the acquiring company

or, as the case may be, by that company and any relevant associated

companies.

          (5)      In this paragraph “relevant associated company”, in relation to the acquiring

40

company, means a company—

              (a)             that is controlled by the acquiring company immediately before the

control of that company changes, and

              (b)             of which control changes in consequence of the change of control of

that company.

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          (6)      In this paragraph—

              (a)             “arrangements” includes any scheme, agreement or understanding,

whether or not legally enforceable;

              (b)             “control” shall be construed in accordance with section 416 of the

Taxes Act 1988; and

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