Finance Bill 2002
Amendment 14 Page 434 Line 22
Amendment 15 Page 437 Line28
Amendment 18 Page 444 Line 5
Mr Chancellor of the Exchequer
Page 434, line 22 [Schedule 29], leave out sub-paragraph (4) and insert-
'(4) Sub-paragraph (1) has effect subject to-
(a) paragraph 126 (application of Schedule to fungible assets), and
(b) paragraph 126A (certain assets acquired on transfer of a business treated as existing assets).'.
Page 437, line 28 [Schedule 29], at end insert-
'Certain assets acquired on transfer of business treated as existing assets
126A (1) This paragraph applies where-
(a) an asset that is an existing asset in the hands of a company ("the
transferor company") is transferred to another company ("the transferee
company"), and
(b) the transfer is one in relation to which-
(i) section 139 of the Taxation of Chargeable Gains Act 1992
(reconstruction or amalgamation involving transfer of
business), or
(ii) section 140A of that Act (transfer of UK trade to company
resident in another member State),
applies with the effect that the transferor company is treated for the
purposes of that Act as disposing of the asset for a consideration that
secures that neither a gain nor a loss accrues to that company.
(2) Where this paragraph applies the asset shall be treated for the purposes of this Schedule as an existing asset in the hands of the transferee company.
(3) This paragraph does not apply where the transfer mentioned in sub-paragraph (1) occurred before 28th June 2002.'.
Page 444, line 5 [Schedule 29], at end insert '(and see paragraph 126A)'.
EXPLANATORY NOTE
SUMMARY
1. The purpose of these amendments is to correct a mismatch between the intangibles legislation and the capital gains rules on company reconstructions and certain cross-border transactions.
2. Where an asset within the capital gains rules is transferred in these circumstances and the qualifying conditions are met, the asset is regarded as sold by the transferor company for such consideration as ensures the transferor makes neither a gain nor loss; the cost of the asset in the hands of the transferee company is the same figure.
3. Without the proposed amendments the asset would sometimes fall within the rules in Schedule 29, not the capital gains rules, in the hands of the transferee company. Furthermore, the asset would be regarded as acquired (in effect) at market value, rather than on no gain/no loss terms. But the transferor company would still be regarded as disposing of the asset for capital gains purposes on no gain/no loss terms.
4. The amendments correct this mismatch and ensure that there will continue to be a tax-neutral result in the cases concerned. They provide that where, on a reconstruction or relevant cross-border transaction, the asset is within the capital gains rules in the hands of the transferor, it remains within those rules in the hands of the transferee.
DETAILS OF THE AMENDMENTS
5. Amendment 14 replaces the existing paragraph 118(4) of Schedule 29. The revised sub-paragraph ensures that the general commencement rules in paragraph 118(1) apply subject to the new paragraph 126A (as well as to paragraph 126 as at present).
6. Amendment 15 proposes the substantive change. It inserts the new paragraph 126A into the Schedule. Paragraph 126A(1) identifies the circumstances in which the paragraph applies. That is where there has been a transfer of a business in circumstances such that either section 139 or section 140A of the Taxation of Chargeable Gains Act 1992 applies to treat the transferor company as disposing of an 'existing asset' on no gain/no loss terms. An 'existing asset' is defined in paragraph 118(3) of the Schedule as one to which the Schedule does not apply (in the absence of express provision to that effect).
7. Paragraph 126A(2) provides that in these circumstances the asset is also regarded as an existing asset in the hands of the transferee company.
8. Paragraph 126A(3) ensures that the paragraph does not apply to transfers of assets before 28th June 2002.
9. Amendment 18 introduces a consequential change to the index of defined expressions in paragraph 142 of the Schedule.