Preparing the group for sale or acquisition

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Preparing the group for sale or acquisition
  • Introduction
  • Transfer of a trade without a change in ownership
  • Transfer of other assets
  • Transfer of stock

Introduction

It may be necessary to carry out various preparatory steps before a group of companies are sold or acquired. This may be due to the fact that a purchaser only wishes to acquire certain assets or companies within a group, or the vendor wishes to retain certain assets or companies. This will be a matter for negotiation between purchaser and vendor. Some of the relevant tax considerations are set out below.

Transfer of a trade without a change in ownership

The transfer of a trade between group members is commonly referred to as a ‘hive down’, ‘hive up’ or ‘hive across’, depending upon where in the group structure the trade is transferred to. The legislation allows a trade to be transferred under ‘common 75% ownership’ with the ability to carry forward tax losses into the successor company. A tax-neutral transfer takes place for capital allowances purposes, as the pools are transferred at tax written down value.

CTA 2010, ss 940A–956

The rules apply where one company owns at least 75% of another or both companies are under the 75% common ownership of the same person or persons. ‘Person’ can either be a company or an individual for the purposes of these provisions.

The transfer of trade rules apply automatically where the conditions are met, and therefore it is not necessary to make a claim to HMRC.

Please refer to the Transfer of a trade guidance note for further details, including the circumstances

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