Commentary

D6.523 Transfer of non-UK business to a non-resident company

Corporate tax
Corporate tax | Commentary

D6.523 Transfer of non-UK business to a non-resident company

Corporate tax | Commentary

D6.523 Transfer of non-UK business to a non-resident company

Where a business which a UK resident company carries on outside the UK through a permanent establishment, is disposed of to a non-resident company, it is possible to make a claim to defer any tax charge realised on the capital gain if certain conditions are met.

Qualifying conditions to defer the tax on the capital gain

In order to make a claim, the following conditions must be satisfied1:

  1.  

    (a)     the UK company must transfer the whole or part of the overseas business, together with all the assets, other than cash, of that business or the part of it transferred, to a company which is not resident in the UK2

  2.  

    (b)     the consideration for the transfer must consist at least partly of securities in the foreign company (shares and loan stock)

  3.  

    (c)     after the issue of shares etc to the UK company, the UK company must hold at least 25% of the ordinary share capital3 of the overseas company

  4.  

    (d)     the chargeable gains accruing on the transfer must exceed the allowable losses so accruing (the excess of the chargeable gains over the allowable losses is treated as giving rise to a single chargeable gain)4; and

  5.  

    (e)     no claim must have been made for the relief applicable to EU

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