The Corporation Tax (Implementation of the Mergers Directive) Regulations 2007

Made: 8th November 2007

Laid before the House of Commons: 8th November 2007

Coming into force: 29th November 2007

The Treasury make the following Regulations in exercise of the powers conferred by section 110 of the Finance Act 2007 .

The Treasury are satisfied in accordance with section 110(3) of the Finance Act 2007 that the following Regulations are necessary for the purpose of complying with the United Kingdom's obligations under the Mergers Directive.

Citation, commencement and effect

1

• (1) These Regulations may be cited as the Corporation Tax (Implementation of the Mergers Directive) Regulations 2007.

• (2) These Regulations shall come into force on 29th November 2007 and shall have effect as set out in regulation 3.

Interpretation

2

In these Regulations—

• “TCGA 1992” means the Taxation of Chargeable Gains Act 1992 ;

• “ICTA” means the Income and Corporation Taxes Act 1988 ;

• “CAA 2001” means the Capital Allowances Act 2001 ;

• “FA 1988” means the Finance Act 1988 ;

• “FA 1996” means the Finance Act 1996 ; and

• “FA 2002” means the Finance Act 2002 .

Amendments of primary legislation

3

• (1) Schedule 1, which contains amendments to TCGA 1992, ICTA, FA 1996, FA 2002, CAA 2001 relating to cross-border transfers of business, has effect in relation to transfers which take place on or after 1st January 2007.

• (2) Schedule 2, which contains amendments to TCGA 1992, ICTA, FA 1988, FA 1996, FA 2002 and CAA 2001 relating to cross-border mergers, has effect but subject as follows—

• (a) paragraphs 1 to 14 have effect—

• (i) in relation to mergers relating to the formation of an SE or SCE which take place on or after 18th August 2006, and

• (ii) in relation to all other mergers which take place on or after 1st January 2007;

• (b) paragraph 15 has effect in relation to transfers of a registered office which take effect on or after 18th August 2006.

• (3) Schedule 3, which contains amendments to TCGA 1992, FA 1996 and FA 2002 relating to mergers and treatment of transparent entities, has effect—

• (a) in relation to mergers relating to the formation of an SE or SCE which take place on or after 18th August 2006, and

• (b) in relation to all other mergers which take place on or after 1st January 2007.

SCHEDULE 1 — CROSS-BORDER TRANSFERS OF BUSINESS

PART 1 — AMENDMENTS OF TGCA 1992

1

TCGA 1992 is amended as follows.

Division of UK business

2

• (1) Section 140A (transfer of a UK trade) is amended as follows.

• (2) In subsection (1)—

• (a) for “company A” substitute “ the transferor ”,

• (b) for “company B” substitute “ the transferee ”,

• (c) for “qualifying company” substitute “ company ”, and

• (d) for “trade” substitute “ business ”.

• (3) After subsection (1) insert—

(1A) This section also applies where a company transfers part of its business to one or more companies if— (a) the transferor is resident in one member State, (b) the part of the transferor's business which is to be transferred is carried on by the transferor in the United Kingdom, (c) at least one transferee is resident in a member State other than that in which the transferor is resident, (d) the transferor company continues to carry on a business after the transfer, (e) the conditions in subsection (1)(c) to (e) are satisfied (for which purpose references to the transferee shall be taken as references to each of the transferees), and (f) either of the following conditions is satisfied. (1B) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor. (1C) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (1D) If Condition 2 applies in relation to the whole or part of a transfer, sections 24 and 122 do not apply in relation to the transfer.

• (4) In subsections (2) to (4)—

• (a) for “company A” substitute “ the transferor ”, and

• (b) for “company B” substitute “ the transferee (or each of the transferees) ”.

• (5) In subsection (4) for “the two companies” substitute “ the transferor and the transferee (or each of the transferees) ”.

• (6) Omit subsections (5), (6) and (7).

• (7) The heading accordingly becomes “ “Transfer or division of UK business ”.

3

In section 140B (section 140A: anti-avoidance)—

• (a) for “company A” substitute “ the transferor ”,

• (b) for “company B” substitute “ the transferee (or each of the transferees) ”, and

• (c) for “trade” substitute “ business ”.

Division of non-UK business

4

• (1) Section 140C (transfer of non-UK trade) is amended as follows.

• (2) In subsection (1)—

• (a) for “company A” substitute “ the transferor ”,

• (b) for “company B” substitute “ the transferee ”,

• (c) for “qualifying company” substitute “ company ”, and

• (d) for “trade” substitute “ business ”.

• (3) After subsection (1) insert—

(1A) This section also applies where a company resident in the United Kingdom transfers part of its business to one or more companies if— (a) the part of the transferor's business which is to be transferred is carried on, immediately before the time of the transfer, by the transferor in a member State other than the United Kingdom through a permanent establishment, (b) at least one transferee is resident in a member State other than the United Kingdom, (c) the transferor company continues to carry on a business after the transfer, (d) the conditions in subsection (1)(b), (d), (e) and (f) are satisfied, and (e) either of the following conditions is satisfied. (1B) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor. (1C) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself.

• (4) In subsections (3) and (8) for “company A” substitute “ the transferor ”.

• (5) Omit subsections (6), (7) and (9).

• (6) The heading accordingly becomes “ Transfer or division of non-UK business ”.

5

In section 140D (section 140C: anti-avoidance)—

• (a) for “company A” substitute “ the transferor ”, and

• (b) for “trade” substitute “ business ”.

Treatment of securities issued on transfer of assets

6

After section 140D insert—

(140DA) (1) This section applies where— (a) a transfer of assets to which section 140A(1A) or 140C(1A) applies has taken place, (b) the transferor and the transferee (or each of the transferees) are each resident in a member State, (c) they are not all resident in the same State, and (e) the transfer does not constitute or form part of a scheme of reconstruction within the meaning of section 136. (2) Where this section applies, the transfer shall be treated for the purposes of section 136 as if it were a scheme of reconstruction. (3) Where section 136 applies by virtue of subsection (2) above section 136(6) (and section 137) shall not apply.

Held over gains

7

After section 140(6A) (postponement of a charge on transfer of assets to non-resident company) insert—

(6AA) If securities are transferred by a transferor company as part of the process of the transfer of a business to which section 140A or 140C applies— (a) the transfer shall be disregarded for the purposes of subsection (4), and (b) the transferee company shall be treated as if it were the transferor company in relation to— (i) any subsequent disposal of the securities, and (ii) any subsequent disposal by the transferee of assets to which subsection 5 applies.

8

After section 154(2C) (new assets which are depreciating assets) (inserted by paragraph 6 of Schedule 2) insert—

(2D) Subsections (2A) and (2B) shall apply in relation to the transfer of an asset in circumstances where section 140A applies as they apply in relation to the transfer of an asset on a merger to which section 140E applies, and for that purpose— (a) references to the merger shall be treated as references to the transfer, (b) references to section 140E shall be treated as references to section 140A, and (c) references to the transferor and the transferee shall be treated as references to the transferor and the transferee in relation to the asset.

9

After section 179(1A) (company ceasing to be member of group: post appointment day cases) insert—

(1AA) If shares in a company are transferred as part of the process of the transfer of a business to which section 140A or 140C applies and in consequence of the transfer the company ceases to be a member of a group (“Group 1”)— (a) the company shall not be treated for the purposes of this section as having left Group 1, and (b) if the transferee is a member of a group (“Group 2”) and in consequence of the transfer the company becomes a member of Group 2 it shall be treated, for the purposes of this section, as if Group 1 and Group 2 were the same.

Loan relationships

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART 2 — AMENDMENTS OF ICTA

11

ICTA is amended as follows.

Exempt distributions

12

After section 209(1) (meaning of “distribution”) insert—

(1A) If a company making a distribution as part of a merger to which section 140E or section 140F of the 1992 Act (cross-border mergers) applies ceases to exist in the course of the merger (without being wound up), the distribution shall be treated for the purposes of subsection (1) as a distribution in respect of share capital in a winding up.

13

After section 213 (exempt distributions) insert—

(213A) (1) A reference in the Corporation Tax Acts to distributions of a company shall not apply to a distribution if— (a) it is a distribution consisting of— (i) the transfer of part of a business by a company (“the distributing company”) to one or more other companies (“the transferee company or companies”), and (ii) the issue of shares by the transferee company or companies to the members of the distributing company, and (b) the requirements of either section 140A(1A) of the 1992 Act (division of UK business) or section 140C(1A) of that Act (division of non-UK business) are satisfied in relation to the distribution. (2) A distribution to which this section applies is an “exempt distribution” for the purposes of sections 214 to 217. (3) The expression “relevant company” in sections 214 to 217 includes the distributing company and the transferee company or companies.

14

In section 218(1) (interpretation of sections 213 to 217)—

• (a) for the definitions of “distributing company” and “exempt distribution” substitute—

• “distributing company” means a company to which section 213(3)(b) or 213A(1)(a) applies;
• “exempt distribution” means a distribution falling within section 213(2) or 213A;

, and

• (b) for the definition of “relevant company” substitute—

“relevant company” means a company falling within section 213(3) or 213A(3);

PART 3 — AMENDMENTS OF FA 1996

15

Schedule 9 to FA 1996 (loan relationships: special computational provisions) is amended as follows.

Loan relationships

16

After paragraph 12C (European cross-border mergers) (inserted by paragraph 9 of Schedule 2) insert—

(12D) (1) This paragraph applies where— (a) a company resident in one member State transfers to a company resident in another member State the whole or part of a business carried on in the United Kingdom, (b) the transfer is wholly in exchange for shares or debentures issued by the transferee to the transferor, (c) the transferor and the transferee each make a claim under this paragraph, and (d) either— (i) the transferee is resident in the United Kingdom immediately after the transfer, or (ii) the transferee is within the charge to corporation tax immediately after the transfer in accordance with section 11 of the Taxes Act 1988 . (2) This paragraph also applies where a company transfers part of its business to one or more companies if— (a) the transferor is resident in one member State, (b) the part of the transferor's business which is to be transferred is carried on by the transferor in the United Kingdom, (c) at least one transferee is resident in a member State other than that in which the transferor is resident (and each transferee is resident in a member State, but not necessarily the same one), (d) the transferor continues to carry on a business, (e) the conditions in sub-paragraph (1)(c) and (d) are satisfied (for which purpose references to the transferee shall be treated as references to each of the transferees), and (f) either of the following conditions is satisfied. (3) Condition 1 is that the transfer is made in exchange for shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor. (4) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (5) If Condition 2 applies in relation to the whole or part of a transfer, sections 24 and 122 of the Taxation of Chargeable Gains Act 1992 do not apply in relation to the transfer. (6) Where this paragraph applies, in determining credits and debits to be brought into account for the purposes of this Chapter in respect of a loan relationship, if an asset or liability which represents the loan relationship is transferred in the course of the transfer of the business or part mentioned in sub-paragraph (1) or (2), the transferor and the transferee companies shall be treated as having entered into the transfer for a consideration equal to the notional carrying value (within the meaning given by paragraph 12(2)) of the asset or liability. (7) Paragraph 12(2A) shall have effect (with any necessary modifications) in relation to this paragraph as it has effect in relation to paragraph 12. (12E) (1) This paragraph applies to a transaction if— (a) a company resident in the United Kingdom transfers to a company resident in another member State the whole or part of a business which immediately before the transfer the transferor carried on in a member State other than the United Kingdom through a permanent establishment, and (b) the transfer is wholly or partly in exchange for shares or debentures issued by the transferee to the transferor. (2) This paragraph also applies where a company resident in the United Kingdom transfers part of its business to one or more companies if— (a) the part of the transferor's business which is to be transferred was carried on immediately before the transfer in a member State other than the United Kingdom through a permanent establishment, (b) at least one transferee is resident in a member State other than the United Kingdom (and each transferee is resident in a member State, but not necessarily the same one), (c) the transferor continues to carry on a business after the transfer, and (d) either of the following conditions is satisfied. (3) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor. (4) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (5) If, as a result of a transaction to which this paragraph applies, tax would have been chargeable under the law of one or more other member States in respect of the transfer of the loan relationship but for the Mergers Directive, Part 18 of the Taxes Act 1988 (double taxation relief) including any arrangements having effect by virtue of section 788 of that Act (bilateral relief) shall apply as if that tax had been chargeable. (6) In calculating tax notionally chargeable under sub-paragraph (3) it shall be assumed— (a) that to the extent permitted by the law of the other member State losses arising on the transfer are set against gains arising on the transfer, and (b) that any relief due to the transferor under that law is claimed. (12F) (1) Paragraph 12D or 12E shall apply in relation to the transfer of the whole or part of a business only if— (a) it is effected for bona fide commercial reasons, and (b) it does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to income tax, corporation tax or capital gains tax. (2) But sub-paragraph (1) shall not prevent paragraph 12D or 12E from applying in relation to a transfer if before the transfer the Commissioners for Her Majesty's Revenue and Customs have on the application of the transferor and transferee or transferees notified them that the Commissioners are satisfied that sub-paragraph (1) will not prevent paragraph 12D or 12E from applying in relation to the transfer. (3) Section 138(2) to (5) of the TCGA 1992 shall have the same effect in relation to sub-paragraph (2) above as in relation to section 138(1). (12G) (1) This paragraph applies if sections 127 to 130 of TCGA 1992 (equation of original shares and new holding) apply in relation to a reorganisation. (2) In this paragraph “the original shares” has the meaning given by section 126(1) of TCGA 1992. (3) Where this paragraph applies and the original shares consist of or include an asset representing a loan relationship, then unless sub-paragraph (4), (5) or (6) applies such debits and credits shall be brought into account for the purposes of this Chapter as would have been brought into account if the transaction had been a disposal of the old asset at fair value. (4) This sub-paragraph applies if the transaction is a conversion of securities (within the meaning given by section 132(3) of TCGA 1992) occurring in consequence of the operation of the terms of a security or a debenture which is not a security. (5) This sub-paragraph applies if paragraph 12B, 12C, 12D(2) or 12E(2) above applies in relation to the transaction. (6) This sub-paragraph applies if— (a) section 135 of TCGA 1992 applies in relation to the transaction, and (b) company A is resident in one member State and company B is resident in another member State. (7) If sub-paragraph (4), (5) or (6) applies, such debits and credits shall be brought into account for the purposes of this Chapter as would have been brought into account if the transaction had been a disposal of the old asset at a consideration equal to its notional carrying value (within the meaning given by paragraph 12(2)). (8) Paragraph 12(2A) shall have effect (with any necessary modifications) in relation to sub-paragraphs (4) to (7) as it has effect in relation to paragraph 12.

17

In paragraph 12A (transferee leaving group) —

• (a) after sub-paragraph (5) insert—

(5A) Where an asset or liability which represents a loan relationship is transferred as part of the process of a transfer to which paragraph 12B or 12D applies, and in consequence of the transfer the transferee company ceases to be a member of a group (“Group 1”)— (a) the transferee shall not be treated for the purposes of this paragraph as having left Group 1, and (b) if in consequence of the transfer the transferee becomes a member of another group (“Group 2”) it shall be treated, for the purposes of this paragraph, as if Group 1 and Group 2 were the same.

, and

• (b) in sub-paragraph (8), in the definition of “exempt distribution” after “section 213(2)” insert “ or 213A ”.

PART 4 — AMENDMENTS OF FA 2002

18

FA 2002 is amended as follows.

Derivative contracts

19

After paragraph 30C of Schedule 26 (European cross-border mergers) (inserted by paragraph 11 of Schedule 2) insert—

(30D) (1) This paragraph applies where— (a) a company resident in one member State transfers to a company resident in another member State the whole or part of a business carried on in the United Kingdom, (b) the transfer is wholly in exchange for shares or debentures issued by the transferee to the transferor, (c) the transferor and the transferee each make a claim under this paragraph, and (d) either— (i) the transferee is resident in the United Kingdom immediately after the transfer, or (ii) the transferee is within the charge to corporation tax immediately after the transfer in accordance with section 11 of the Taxes Act 1988. (2) This paragraph also applies where a company transfers part of its business to one or more companies if— (a) the transferor is resident in one member State, (b) the part of the transferor's business which is to be transferred is carried on by the transferor in the United Kingdom, (c) at least one transferee is resident in a member State other than that in which the transferor is resident (and each transferee is resident in a member State, but not necessarily the same one), (d) the transferor continues to carry on a business after the transfer, (e) the conditions in sub-paragraph (1)(c) and (d) are satisfied (for which purpose references to the transferee shall be treated as references to each of the transferees), and (f) either of the following conditions is satisfied. (3) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor. (4) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (5) If Condition 2 applies in relation to the whole or part of a transfer, sections 24 and 122 of the Taxation of Chargeable Gains Act 1992 do not apply in relation to the transfer. (6) Where this paragraph applies, in determining credits and debits to be brought into account for the purposes of this Chapter in respect of a derivative contract, if the rights and liabilities under the derivative contract are transferred in the course of the transfer of the business or part mentioned in sub-paragraph (1) or (2), the transferor and the transferee companies shall be treated as having entered into the transfer for a consideration equal to the notional carrying value (within the meaning given by paragraph 28(3) ) of the derivative contract. (7) Paragraph 30 shall have effect (with any necessary modifications) in relation to this paragraph as it has effect in relation to paragraph 28. (30E) (1) This paragraph applies where— (a) a company resident in the United Kingdom transfers to a company resident in another member State the whole or part of a business which immediately before the transfer the transferor carried on in a member State other than the United Kingdom through a permanent establishment, (b) the transfer is wholly or partly in exchange for shares or debentures issued by the transferee to the transferor or to the persons holding shares in or debentures of the transferor, (c) the transfer includes the transfer of rights or liabilities under a derivative contract, and (d) the transferor makes a claim under this paragraph. (2) This paragraph also applies where a company resident in the United Kingdom transfers part of its business to one or more companies if— (a) the part of the transferor's business which is to be transferred was carried on immediately before the transfer in a member State other than the United Kingdom through a permanent establishment, (b) at least one transferee is resident in a member State other than the United Kingdom (and each transferee is resident in a member State, but not necessarily the same one), (c) the transferor continues to carry on a business, (d) the conditions in sub-paragraph (1)(c) and (d) are satisfied, and (e) either of the following conditions is satisfied. (3) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor. (4) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (5) Where tax would have been chargeable under the law of one or more other member States in respect of the transfer of rights and liabilities under the derivative contract but for the Mergers Directive, Part 18 of the Taxes Act 1988 (double taxation relief) including any arrangements having effect by virtue of section 788 of that Act (bilateral relief) shall apply as if that tax had been chargeable. (6) In calculating tax notionally chargeable under sub-paragraph (5) it shall be assumed— (a) that to the extent permitted by the law of the other member State losses arising on the transfer are set against gains arising on the transfer, and (b) that any relief due to the transferor under that law is claimed. (30F) (1) Paragraph 30D or 30E shall apply in relation to the transfer of the whole or part of a business only if— (a) it is effected for bona fide commercial reasons, and (b) it does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to income tax, corporation tax or capital gains tax. (2) But sub-paragraph (1) shall not prevent paragraph 30D or 30E from applying in relation to a transfer if before the transfer the Commissioners for Her Majesty's Revenue and Customs have on the application of the transferor and transferee or transferees notified them that the Commissioners are satisfied that sub-paragraph (1) will not prevent paragraph 30D or 30E from applying in relation to the transfer. (3) Section 138(2) to (5) of the TCGA 1992 shall have the same effect in relation to sub-paragraph (2) above as in relation to section 138(1).

20

• (1) Paragraph 30A of Schedule 26 (transferee leaving group) is amended as follows.

• (2) After sub-paragraph (5) insert—

(5A) Where rights and liabilities under a derivative contract are transferred as part of the process of a transfer to which paragraph 30B or 30D applies, and in consequence of the transfer the transferee company ceases to be a member of a group (“Group 1”)— (a) the transferee shall not be treated for the purposes of this paragraph as having left Group 1, and (b) if in consequence of the transfer the transferee becomes a member of another group (“Group 2”) it shall be treated, for the purposes of this paragraph, as if Group 1 and Group 2 were the same.

• (3) In sub-paragraph (8), in the definition of “exempt distribution” after “section 213(2)” insert “ or 213A ”.

Intangible fixed assets

21

• (1) Paragraph 85 of Schedule 29 (transfer of UK trade between companies resident in different EU member states) is amended as follows.

• (2) For sub-paragraph (1) substitute—

(1) This paragraph applies where— (a) an EU company resident in one member State (“the transferor”) transfers the whole or part of the business carried on by it in the United Kingdom to an EU company resident in another member State (“the transferee”), (b) the transfer is wholly in exchange for securities issued by the transferee to the transferor, and (c) a claim is made under this paragraph by the transferor and the transferee. (1A) This paragraph also applies where an EU company transfers part of its business to one or more EU companies if— (a) the transferor is resident in one member State, (b) the part of the transferor's business which is to be transferred is carried on by the transferor in the United Kingdom, (c) at least one transferee is resident in a member State other than that in which the transferor is resident, (d) the transferor continues to carry on a business after the transfer, (e) a claim is made under this paragraph by the transferor and the transferee (or each of the transferees), and (f) either of the following conditions is satisfied. (1B) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor. (1C) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (1D) If Condition 2 applies in relation to the whole or part of a transfer, sections 24 and 122 of the Taxation of Chargeable Gains Act 1992 do not apply in relation to the transfer.

• (3) In sub-paragraph (4) for “trade” substitute “ business ”.

• (4) In sub-paragraph (5) after “transferee” insert “ (or each of the transferees) ”.

• (5) The heading above paragraph 85 accordingly becomes “ Transfer of UK business between companies resident in different EU member States ”.

22

• (1) Paragraph 87 of Schedule 29 (transfer of non-UK trade) is amended as follows,

• (2) For sub-paragraph (1) substitute—

(1) This paragraph applies where— (a) an EU company resident in the United Kingdom (“the transferor”) transfers to an EU company resident in another member State (“the transferee”) the whole or part of a business that, immediately before the time of the transfer, the transferor carried on in a member state other than the United Kingdom (“the other member State”) through a permanent establishment, (b) the transfer— (i) includes the whole of the assets of the transferor used for the purposes of the business or part (or the whole of those assets other than cash), and (ii) is wholly or partly in exchange for securities issued by the transferee to the transferor, (c) the transfer includes intangible fixed assets— (i) that are chargeable intangible assets in relation to the transferor immediately before the transfer, and (ii) in the case of one or more of which the proceeds of realisation exceed the costs recognised for tax purposes, and (d) the transferor makes a claim under this paragraph. (1A) This paragraph also applies where an EU company resident in the United Kingdom transfers part of its business to one or more EU companies— (a) immediately before the time of the transfer, the transferor was carrying on the part of its business to be transferred in the other member State through a permanent establishment, (b) at least one transferee is resident in a member State other than the United Kingdom, (c) the transferor continues to carry on a business, (d) the conditions in sub-paragraph (1)(b)(i), (c) and (d) are satisfied, and (e) either of the following conditions is satisfied. (1B) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor. (1D) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself.

• (3) In sub-paragraph (7) for “trade” substitute “ business ”.

• (4) The heading accordingly becomes “ Transfer of non-UK business ”.

23

After paragraph 58(5) of Schedule 29 insert—

(6) Where a relevant asset is transferred as part of the process of a transfer to which paragraph 85 or 87 applies, and in consequence of the transfer the transferee ceases to be a member of a group (“Group 1”)— (a) the transferee shall not be treated for the purposes of this paragraph as having left Group 1, and (b) if in consequence of the transfer the transferee becomes a member of another group (“Group 2”) it shall be treated, for the purposes of this section, as if Group 1 and Group 2 were the same.

24

In paragraph 127 (certain assets to be treated as existing assets)—

• (a) in sub-paragraph (1)(b)(ii) for “trade” substitute “ business ”, and

• (b) in sub-paragraph (1)(b)(iii) for “(transfer on formation of SE by merger)” substitute “ (merger leaving assets within UK tax charge) ”.

PART 5 — AMENDMENT OF CAA 2001

Capital allowances

25

• (1) Section 561 of CAA 2001 (transfer of UK trade to a company in another member state) is amended as follows.

• (2) For subsection (1) substitute—

(1) This section applies if and in so far as— (a) a qualifying company resident in one member State (“the transferor”) transfers the whole or part of a business carried on by it in the United Kingdom to one or more qualifying companies resident in one or more other member States (“the transferee” or “the transferees”), (b) section 140A of TCGA 1992 (transfer of assets treated as no-gain no-loss disposal) applies in relation to the transfer, and (c) immediately after the transfer the transferee (or one or more of the transferees)— (i) is resident in the United Kingdom, or (ii) carries on in the United Kingdom through a permanent establishment a business which consists of, or includes, the business or part of the business transferred.

• (3) In subsection (2)(b)—

• (a) for “company A” substitute “ the transferor ”, and

• (b) for “company B” substitute “ the transferee (or each transferee) ”.

• (4) The heading accordingly becomes “ Transfer or division of UK business ”.

SCHEDULE 2 — EUROPEAN CROSS-BORDER MERGERS

PART 1 — AMENDMENTS OF TCGA 1992

1

TCGA 1992 is amended as follows.

2

For sections 140E (merger leaving assets in the UK tax charge), 140F (merger not leaving assets in the UK tax charge) and 140G (treatment of securities issued on merger) substitute—

(140E) (1) This section applies on a merger which satisfies the conditions specified in subsection (2), where— (a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea), (b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a society registered under the Industrial and Provident Societies Act 1965 , in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/2003 on the Statute for a European Cooperative Society (SCE), (c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or (d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures. (2) The conditions mentioned in subsection (1) are that — (a) each of the merging companies is resident in a member State, (b) the merging companies are not all resident in the same State, (c) section 139 does not apply to any qualifying transferred assets, (d) in the case of a merger to which subsection (1)(a), (b) or (c) applies, either— (i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or (ii) sub-paragraph (i) is not satisfied by reason only, and to the extent only, that the transferee is prevented from complying with sub-paragraph (i) by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself, and (e) in the case of a merger to which subsection (1)(c) or (d) applies, in the course of the merger each transferor ceases to exist without being in liquidation (within the meaning given by section 247 of the Insolvency Act 1986 ). (3) Where this section applies, qualifying transferred assets shall be treated for the purposes of corporation tax on chargeable gains as if acquired by the transferee for a consideration resulting in neither gain nor loss for the transferor. (4) For the purposes of subsections (2) and (3) an asset is a qualifying transferred asset if— (a) it is transferred to the transferee as part of the process of the merger, and (b) subsections (5) and (6) are satisfied in respect of it. (5) This subsection is satisfied in respect of a transferred asset if— (a) the transferor is resident in the United Kingdom at the time of the transfer, or (b) any gain that would have accrued to the transferor, had it disposed of the asset immediately before the time of the transfer, would have been a chargeable gain forming part of the transferor's chargeable profits in accordance with section 10B. (6) This subsection is satisfied in respect of a transferred asset if— (a) the transferee is resident in the United Kingdom at the time of the transfer, or (b) any gain that would accrue to the transferee were it to dispose of the asset immediately after the transfer would be a chargeable gain forming part of the transferee's chargeable profits in accordance with section 10B. (7) If subsection (2)(d)(ii) applies in relation to a transfer of assets and liabilities on a merger (in whole or in part), sections 24 and 122 do not apply. (8) This section does not apply in relation to a merger if— (a) it is not effected for bona fide commercial reasons, or (b) it forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax, and section 138 (clearance in advance) shall apply to this subsection as it applies to section 137 (with any necessary modifications). (9) In this section— (a) “cooperative society” means a society registered under the Industrial and Provident Societies Act 1965 or a similar society established in accordance with the law of a member State other than the United Kingdom, (b) “transferor” means— (i) in relation to a merger to which subsection (1)(a) applies, each company merging to form the SE, (ii) in relation to a merger to which subsection (1)(b) applies, each cooperative society merging to form the SCE, and (iii) in relation to a merger to which subsection (1)(c) or (d) applies, each company transferring all of its assets and liabilities, (c) “transferee” means— (i) in relation to a merger to which subsection (1)(a) applies, the SE, (ii) in relation to a merger to which subsection (1)(b) applies, the SCE, and (iii) in relation to a merger to which subsection (1)(c) or (d) applies, the company to which assets and liabilities are transferred, and (d) references in subsections (1)(c) and (2) to (7) to a company include references to a cooperative society. (140F) (1) This section applies on a merger which satisfies the conditions specified in subsection (2), where— (a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea), (b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a society registered under the Industrial and Provident Societies Act 1965, in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/2003 on the Statute for a European Cooperative Society (SCE), (c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or (d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures. (2) The conditions mentioned in subsection (1) are that— (a) each merging company is resident in a member State, (b) the merging companies are not all resident in the same State, (c) in the course of the merger a company resident in the United Kingdom (“company A”) transfers to a company resident in another member State (“company B”) all assets and liabilities relating to a business which company A carried on in a member State other than the United Kingdom through a permanent establishment, (d) the aggregate of the chargeable gains accruing to company A on the transfer exceeds the aggregate of any allowable losses so accruing, and (e) in the case of a merger to which subsection (1)(a), (b) or (c) applies, either— (i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or (ii) sub-paragraph (i) is not satisfied by reason only, and to the extent only, that the transferee is prevented from complying with sub-paragraph (i) by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (3) Where this section applies, for the purposes of this Act— (a) the allowable losses accruing to company A on the transfer shall be set off against the chargeable gains so accruing, and (b) the transfer shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses. (4) Where this section applies, section 815A of the Taxes Act (transfer of a non-UK trade) shall also apply. (5) Subsections (8) and (9) of section 140E apply for the purposes of this section as they apply for the purposes of that section. (140G) (1) This section applies on a merger which satisfies the conditions specified in subsection (2), where— (a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea), (b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a society registered under the Industrial and Provident Societies Act 1965, in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/2003 on the Statute for a European Cooperative Society (SCE), (c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or (d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures. (2) The conditions mentioned in subsection (1) are that— (a) each of the merging companies is resident in a member State, (b) the merging companies are not all resident in the same State, and (c) the merger does not constitute or form part of a scheme of reconstruction within the meaning of section 136 . (3) Where this section applies, the merger shall be treated for the purposes of section 136 as if it were a scheme of reconstruction. (4) Where section 136 applies by virtue of subsection (3) above section 136(6) (and section 137) shall not apply. (5) Subsections (8) and (9) of section 140E apply for the purposes of this section as they apply for the purposes of that section.

3

In section 24(1) (destruction &c. of asset) for “section 144” substitute “ sections 140A(1D), 140E(7) and 144 ”.

4

After section 122(1) (capital distributions) insert—

(1A) Subsection (1) is subject to the provisions of section 140A(1D) and section 140E(7).

Held over gains

5

For section 140(6B) (postponement of charge on transfer of assets to non-resident company) substitute —

(6B) If securities are transferred by a transferor as part of the process of a merger to which section 140E applies— (a) the transfer shall be disregarded for the purposes of subsection (4), and (b) the transferee shall be treated as if it were the transferor in relation to— (i) any subsequent disposal of the securities, and (ii) any subsequent disposal by the transferee of assets to which subsection (5) applies. (6C) In subsection (6B) “transferor” and “transferee” have the meaning given by section 140E(9).

6

For section 154(2A) and (2B) (new assets which are depreciating assets) substitute—

(2A) If asset No 2 or shares in a company which holds asset No 2 are transferred as part of the process of a merger to which section 140E applies, the transfer shall be disregarded for the purpose of subsection (2), and for that purpose— (a) if the transferee holds asset No 2, it shall be treated for the purpose of subsection (2), in relation to asset No 2, as if it were the claimant, or (b) if the transferee holds shares in the company which holds asset No 2, section 175 shall apply in relation to the group of which the transferee is a member as if it were the same group as any group of which the claimant was a member before the merger. (2B) If, as part of the process of a merger to which section 140E applies, the transferee becomes a member (whether or not as the principal company) of a group of which the claimant is also a member, for the purposes of subsection (2) section 175 shall apply in relation to the trade carried on by the claimant as if the group of which the transferee is a member were the same group as the group of which the claimant was a member before the merger. (2C) In subsections (2A) and (2B) , “transferor” and “transferee” have the meaning given by section 140E(9).

7

For section 179(1B) and (1C) (de-grouping charge) substitute—

(1B) Where, as part of the process of a merger to which section 140E applies, a company which is a member of a group (“Group 1”) ceases to exist and in consequence of that cessation— (a) assets are transferred to the transferee, or (b) shares in one or more companies which were also members of the group are transferred to the transferee, a company which has ceased to exist, or the shares in which have been transferred to the transferee, shall not be treated for the purposes of this section as having left Group 1. (1C) If subsection (1B) applies in relation to a company then for the purposes of this section— (a) the transferee and a company which has ceased to exist in consequence of the merger shall be treated as the same entity, and (b) if the transferee is a member of a group (“Group 2”) following the merger (whether or not as the principal company of the group) a company which was a member of Group 1 and became a member of Group 2 in consequence of the merger shall be treated, for the purposes of this section, as if Group 1 and Group 2 were the same. (1D) In subsections (1B) and (1C), “transferor” and “transferee” have the meaning given by section 140E(9).

PART 2 — AMENDMENTS OF FA 1996

Loan relationships

8

For paragraph 12B of Schedule 9 to FA 1996 (formation of SE by merger) substitute—

(12B) (1) This paragraph applies on a merger which satisfies the conditions specified in sub-paragraph (2), where— (a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea) , (b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a society registered under the Industrial and Provident Societies Act 1965 , in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/ 2003 on the Statute for a European Cooperative Society (SCE) , (c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or (d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures. (2) The conditions mentioned in sub-paragraph (1) are that— (a) each of the merging companies is resident in a member State, (b) the merging companies are not all resident in the same State, (c) either— (i) immediately after the merger the transferee is resident in the United Kingdom and within the charge to corporation tax in accordance with section 6 of the Taxes Act 1988, or (ii) immediately after the merger the transferee is not resident in the United Kingdom but is within the charge to corporation tax in accordance with section 11 of the Taxes Act 1988 , and (d) in the case of a merger to which sub-paragraph (1)(a), (b) or (c) applies, either— (i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or (ii) sub-paragraph (i) is not satisfied in relation to the transfer by reason only, and to the extent only, that the transferee is prevented from complying with that sub-paragraph by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (3) Where this paragraph applies, in determining credits and debits to be brought into account for the purposes of this Chapter in respect of a loan relationship, if an asset or liability representing the loan relationship is transferred in the course of the merger, the transferor and transferee companies shall be treated as having entered into the transfer for a consideration equal to the notional carrying value (within the meaning given by paragraph 12(2)) of the asset or liability. (4) Paragraph 12(2A) shall have effect (with any necessary modifications) in relation to this paragraph as in relation to paragraph 12. (5) If sub-paragraph (2)(d)(ii) applies in relation to a transfer of assets and liabilities on a merger (in whole or in part) sections 24 and 122 of the Taxation of Chargeable Gains Act 1992 do not apply. (6) Sub-paragraph (3) shall apply in relation to a merger only if— (a) it is effected for bona fide commercial reasons, and (b) it does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax. (7) But sub-paragraph (6) shall not have the effect of preventing sub-paragraph (3) from applying if before the merger the Commissioners for Her Majesty's Revenue and Customs have on the application of any of the merging companies notified them that the Commissioners are satisfied that sub-paragraph (6) will not have that effect. (8) Section 138(2) to (5) of the Taxation of Chargeable Gains Act 1992 shall have the same effect in relation to sub-paragraph (7) above as in relation to section 138(1). (9) For the purposes of this paragraph— (a) “cooperative society” means a society registered under the Industrial and Provident Societies Act 1965 or a similar society governed by the law of a member State other than the United Kingdom, (b) “transferor” means— (i) in relation to a merger to which sub-paragraph (1)(a) applies, each company merging to form the SE, (ii) in relation to a merger to which sub-paragraph (1)(b) applies, each cooperative society merging to form the SCE, and (iii) in relation to a merger to which sub-paragraph (1)(c) or (d) applies, each company transferring all of its assets and liabilities, (c) “transferee” means— (i) in relation to a merger to which sub-paragraph (1)(a) applies, the SE, (ii) in relation to a merger to which sub-paragraph (1)(b) applies, the SCE, and (iii) in relation to a merger to which sub-paragraph (1)(c) or (d) applies, the company to which assets and liabilities are transferred, and (d) references, other than references in sub-paragraph (1)(a), (b) or (d), to a company include references to a cooperative society. (12C) (1) This paragraph applies on a merger which satisfies the conditions specified in sub-paragraph (2), where— (a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea), (b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a society registered under the Industrial and Provident Societies Act 1965, in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/ 2003 on the Statute for a European Cooperative Society (SCE), (c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or (d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures. (2) The conditions mentioned in sub-paragraph (1) are that— (a) each merging company is resident in a member State, (b) the merging companies are not all resident in the same State, (c) in the course of the merger a company resident in the United Kingdom (“company A”) transfers to a company resident in another member State (“company B”) all assets and liabilities relating to a business which company A carried on in a member State other than the United Kingdom through a permanent establishment, (d) the transfer mentioned in paragraph (c) includes the transfer of an asset or liability representing a loan relationship, and (e) in the case of a merger to which sub-paragraph (1)(a), (b) or (c) applies, either— (i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or (ii) sub-paragraph (i) is not satisfied in relation to the transfer by reason only, and to the extent only, that the transferee is prevented from complying with that sub-paragraph by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (3) If tax would have been chargeable under the law of one or more other member States in respect of the transfer of an asset or liability representing a loan relationship but for the Mergers Directive, Part 18 of the Taxes Act (double taxation relief) including any arrangements having effect by virtue of section 788 of that Act (bilateral relief) shall apply as if that tax had been chargeable. (4) In calculating tax notionally chargeable under sub-paragraph (3) it shall be assumed— (a) that to the extent permitted by the law of the other member State losses arising on the transfer are set against gains arising on the transfer, and (b) that any relief due to company A under that law is claimed. (5) Sub-paragraphs (6) to (9) of paragraph 12B apply for the purposes of this paragraph as they apply for the purposes of that paragraph.

PART 3 — AMENDMENTS OF FA 2002

9

FA 2002 is amended as follows.

Derivative contracts

10

For paragraph 30B of Schedule 26 (formation of SE by merger) substitute—

(30B) (1) This paragraph applies on a merger which satisfies the conditions specified in sub-paragraph (2), where— (a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea), (b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a society registered under the Industrial and Provident Societies Act 1965, in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/ 2003 on the Statute for a European Cooperative Society (SCE), (c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or (d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures. (2) The conditions mentioned in sub-paragraph (1) are that— (a) each of the merging companies is resident in a member State, (b) the merging companies are not all resident in the same State, (c) either— (i) immediately after the merger the transferee is resident in the United Kingdom and within the charge to corporation tax in accordance with section 6 of the Taxes Act 1988, or (ii) immediately after the merger the transferee is not resident in the United Kingdom but is within the charge to corporation tax in accordance with section 11 of the Taxes Act 1988, and (d) in the case of a merger to which sub-paragraph (1)(a), (b) or (c) applies, either— (i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or (ii) sub-paragraph (i) is not satisfied in relation to the transfer by reason only, and to the extent only, that the transferee is prevented from complying with that sub-paragraph by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (3) Where this paragraph applies, in determining credits and debits to be brought into account for the purposes of this Chapter in respect of a derivative contract, if the rights and liabilities under the derivative contract are transferred in the course of the merger, the transferor and the transferee companies shall be treated as having entered into the transfer for a consideration equal to the notional carrying value (within the meaning given by paragraph 28(3)) of the derivative contract. (4) Paragraph 30 shall apply, with any necessary modifications, in relation to this paragraph as in relation to paragraph 28. (5) If sub-paragraph (2)(d)(ii) applies in relation to a transfer of assets and liabilities on a merger (in whole or in part) sections 24 and 122 of the Taxation of Chargeable Gains Act 1992 do not apply. (6) Sub-paragraph (3) shall apply in relation to a merger only if— (a) it is effected for bona fide commercial reasons, and (b) it does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax. (7) But sub-paragraph (6) shall not have the effect of preventing sub-paragraph (3) from applying if before the merger the Commissioners for Her Majesty's Revenue and Customs have on the application of any of the merging companies notified them that the Commissioners are satisfied that sub-paragraph (6) will not have that effect. (8) Section 138(2) to (5) of the Taxation of Chargeable Gains Act 1992 shall have the same effect in relation to sub-paragraph (6) above as in relation to section 138(1). (9) For the purposes of this paragraph— (a) “cooperative society” means a society registered under the Industrial and Provident Societies Act 1965 or a similar society governed by the law of a member State other than the United Kingdom, (b) “transferor” means— (i) in relation to a merger to which sub-paragraph (1)(a) applies, each company merging to form the SE, (ii) in relation to a merger to which sub-paragraph (1)(b) applies, each cooperative society merging to form the SCE, and (iii) in relation to a merger to which sub-paragraph (1)(c) or (d) applies, each company transferring all of its assets and liabilities, (c) “transferee” means— (i) in relation to a merger to which sub-paragraph (1)(a) applies, the SE, (ii) in relation to a merger to which sub-paragraph (1)(b) applies, the SCE, and (iii) in relation to a merger to which sub-paragraph (1)(c) or (d) applies, the company to which assets and liabilities are transferred, and (d) references, other than references in sub-paragraph (1)(a), (b) or (d), to a company include references to a cooperative society. (30C) (1) This paragraph applies on a merger which satisfies the conditions specified in sub-paragraph (2), where— (a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea) , (b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a society registered under the Industrial and Provident Societies Act 1965 , in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/ 2003 on the Statute for a European Cooperative Society (SCE) , (c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or (d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures. (2) The conditions mentioned in sub-paragraph (1) are that— (a) each merging company is resident in a member State, (b) the merging companies are not all resident in the same State, (c) in the course of the merger a company resident in the United Kingdom (“company A”) transfers to a company resident in another member State (“company B”) all assets and liabilities relating to a business which company A carried on in a member State other than the United Kingdom through a permanent establishment, (d) the transfer mentioned in paragraph (c) includes the transfer of rights and liabilities under a derivative contract, and (e) in the case of a merger to which sub-paragraph (1)(a), (b) or (c) applies, either— (i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or (ii) sub-paragraph (i) is not satisfied in relation to the transfer by reason only, and to the extent only, that the transferee is prevented from complying with that sub-paragraph by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of another member State preventing the issue of shares or debentures to itself. (3) Where tax would have been chargeable under the law of one or more other member States in respect of the transfer of rights and liabilities under the derivative contract but for the Mergers Directive, Part 18 of the Taxes Act (double taxation relief) including any arrangements having effect by virtue of section 788 of that Act (bilateral relief) shall apply as if that tax had been chargeable. (4) In calculating tax notionally chargeable under sub-paragraph (3) it shall be assumed— (a) that to the extent permitted by the law of the other member State losses arising on the transfer are set against gains arising on the transfer, and (b) that any relief due to Company A under that law is claimed. (5) Sub-paragraphs (6) to (9) of paragraph 30B apply for the purposes of this paragraph as they apply for the purposes of that paragraph.

Intangible assets

11

For paragraph 85A of Schedule 29 (formation of SE by merger) substitute—