Corporation Tax Act, 1976

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Company reconstructions without change of ownership.

20.—(1) Where on or after the 6th day of April, 1976, on a company (“the predecessor”) ceasing to carry on a trade, another company (“the successor”) begins to carry it on, and—

(a) on or at any time within two years after that event the trade or an interest amounting to not less than a three-fourths share in it belongs to the same persons as the trade or such an interest belonged to at some time within a year before that event; and

(b) the trade is not, within the period taken for the comparison under paragraph (a), carried on otherwise than by a company which is within the charge to tax in respect of it;

then this Act shall have effect subject to subsections (2) to (5).

In paragraphs (a) and (b) references to the trade shall apply also to any other trade of which the activities comprise the activities of the first-mentioned trade.

(2) The trade shall not be treated as permanently discontinued nor a new trade as set up and commenced for the purpose of the allowances and charges provided for by section 14; but there shall be made to or on the successor in accordance with that section all such allowances and charges as would, if the predecessor had continued to carry on the trade, have fallen to be made to or on it, and the amount of any such allowance or charge shall be computed as if the successor had been carrying on the trade since the predecessor began to do so and as if everything done to or by the predecessor had been done to or by the successor (but so that no sale or transfer which on the transfer of the trade is made to the successor by the predecessor of any assets in use for the purpose of the trade shall be treated as giving rise to any such allowance or charge).

(3) The predecessor shall not be entitled to relief under section 18, except as provided by subsection (5) of this section; and, subject to any claim made by the predecessor under section 16 (2), the successor shall be entitled to relief under section 16 (1), as for a loss sustained by the successor in carrying on the trade, for any amount for which the predecessor would have been entitled to claim relief if it had continued to carry on the trade.

(4) Any securities within the meaning of section 367 of the Income Tax Act, 1967 (purchase and sale of securities), which at the time when the predecessor ceases to carry on the trade form part of the trading stock belonging to the trade shall be treated for purposes of that section as having been sold at that time in the open market by the predecessor and as having been purchased at that time in the open market by the successor.

(5) On the successor ceasing to carry on the trade—

(a) if the successor does so within four years of succeeding to it, any relief which might be given to the successor under section 18 on its ceasing to carry on the trade may, so far as it cannot be given to the successor, be given to the predecessor as if the predecessor had incurred the loss (including any amount treated as a loss under section 18 (3)); and

(b) if the successor ceases to carry on the trade within one year of succeeding to it, relief may be given to the predecessor under section 18 in respect of any loss incurred by it (or amount treated as such a loss under section 18 (3));

but for the purposes of section 18, as it applies by virtue of this subsection to the giving of relief to the predecessor, the predecessor shall be treated as ceasing to carry on the trade when the successor does so.

(6) Where the successor ceases to carry on the trade within the period taken for the comparison under subsection (1) (a) and, on its doing so a third company begins to carry on the trade, then no relief shall be given to the predecessor by virtue of subsection (5) by reference to that event, but subject to that subsections (2) to (5) shall apply both in relation to that event (together with the new predecessor and successor) and to the earlier event (together with the original predecessor and successor), but so that—

(a) in relation to the earlier event “successor” shall include the successor at either event; and

(b) in relation to the later event “predecessor” shall include the predecessor at either event;

and if the conditions of this subsection are thereafter again satisfied, it shall apply again in like manner.

(7) Where, on a company ceasing to carry on a trade, another company begins to carry on the activities of the trade as part of its trade, then that part of the trade carried on by the successor shall be treated for the purposes of this section as a separate trade, if the effect of so treating it is that subsection (1) or (6) has effect on that event in relation to that separate trade; and where, on a company ceasing to carry on part of a trade, another company begins to carry on the activities of that part as its trade or part of its trade, the predecessor shall for purposes of this section be treated as having carried on that part of its trade as a separate trade if the effect of so treating it is that subsection (1) or (6) has effect on that event in relation to that separate trade.

(8) Where under subsection (7) any activities of a company's trade fall, on the company ceasing or beginning to carry them on, to be treated as a separate trade, any necessary apportionment shall be made of receipts or expenses.

(9) Where, by virtue of subsection (8), any sum falls to be apportioned and, at the time of the apportionment, it appears that it is material as respects the liability to tax (for whatever period) of two or more companies, any question which arises as to the manner in which the sum is to be apportioned shall be determined, for the purposes of the tax of all those companies, by the Appeal Commissioners, who shall determine the question in like manner as if it were an appeal against an assessment, and the provisions of the Income Tax Acts relating to the rehearing of an appeal and the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications:

Provided that all the said companies shall be entitled to appear and be heard by the Appeal Commissioners or to make representations to them in writing.

(10) Any relief obtainable under this section by way of discharge or repayment of tax shall be given on the making of a claim.

(11) For the purposes of this section—

(a) a trade carried on by two or more persons shall be treated as belonging to them in the shares in which they are entitled to the profits of the trade;

(b) a trade or interest therein belonging to any person as trustee (otherwise than for charitable or public purposes) shall be treated as belonging to the persons for the time being entitled to the income under the trust;

(c) a trade or interest therein belonging to a company shall, where the result of so doing is that subsection (1) or (6) has effect in relation to an event, be treated in any of the ways permitted by subsection (12).

(12) For the purposes of this section, a trade or interest therein which belongs to a company engaged in carrying it on may be regarded—

(a) as belonging to the persons owning the ordinary share capital of the company and as belonging to them in proportion to the amount of their holdings of that capital, or

(b) in the case of a company which is a subsidiary company, as belonging to a company which is its parent company, or as belonging to the persons owning the ordinary share capital of that parent company, and as belonging to them in proportion to the amount of their holdings of that capital,

and any ordinary share capital owned by a company may, if any person or body of persons has the power to secure by means of the holding of shares or the possession of voting power in or in relation to any company, or by virtue of any power conferred by the articles of association or other document regulating any company, that the affairs of the company owning the share capital are conducted in accordance with his or their wishes, be regarded as owned by the person or body of persons having that power.

(13) For the purposes of subsection (12)—

(a) references to ownership shall be construed as references to beneficial ownership;

(b) a company shall be deemed to be a subsidiary of another company if and so long as not less than 75 per cent. of its ordinary share capital is owned by that other company, whether directly or through another company or other companies, or partly directly and partly through another company or other companies;

(c) the amount of ordinary share capital of one company owned by a second company through another company or other companies, or partly directly and partly through another company or other companies, shall be determined in accordance with section 156 (5) to (10) (subsidiaries); and

(d) where any company is a subsidiary of another company, that other company shall be considered as its parent company unless both are subsidiaries of a third company.

(14) In determining, for the purposes of this section, whether or to what extent a trade belongs at different times to the same persons, persons who are relatives of one another and the persons from time to time entitled to the income under any trust shall respectively be treated as a single person, and for this purpose “relative” means husband, wife, ancestor, lineal descendant, brother or sister.