Tax reliefs for schemes of reconstruction
Tax reliefs for schemes of reconstruction

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Tax reliefs for schemes of reconstruction
  • Policy rationale
  • Tax relief for the shareholder
  • Shareholder relief—the conditions
  • Tax relief for the reconstructed company
  • Company relief—the conditions

FORTHCOMING CHANGE relating to transfers within an EU group: Finance Bill 2020 is expected to contain provisions permitting companies to pay tax in instalments in relation to disposals of assets to companies resident in an EEA State which would take place on a ‘no gain no loss’ basis if the transferee were UK-resident, either under the reconstruction rule in section 139 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) or under the intra-group transfer rules in TCGA 1992, s 171. This measure will also apply to intra-group transfers of loan relationships, derivative contracts or intangible fixed assets to another company resident in an EEA State. The new rule is in response to a 2019 decision of the UK First-tier Tribunal, see News Analysis: First-Tier Tribunal relies on freedom of establishment to partially disapply UK rules on tax-free intra-group transfers (Gallaher Limited v HMRC). The provisions will apply retrospectively from 11 July 2019 in relation to accounting periods ending after 9 October 2018.

Tax relief for chargeable gains is available for both:

  1. the shareholders of a company, and

  2. the company itself

under a scheme of reconstruction provided certain statutory conditions are met.

Tax relief for the company will, however, only be available where the scheme involves the transfer of the whole (or any part) of a business from that company to another