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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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ETMD: transfer of a UK business: main conditions (1)

TCGA 1992 section140A is directed at a transfer of assets and partial divisions where the whole or part of a trade/business is transferred between companies which are resident in different member states. Where the conditions are met then section 140A(4) allows a no gain no loss treatment at the asset tier on chargeable assets that are transferred between the companies. ‘For ‘roll over’ treatment of any gain at the shareholder tier see CG45719.

Whilst most of the conditions within section 140A are common to both transfers of assets and partial divisions there are three important differences between the two. This paragraph sets out the particular conditions which have to be met before section 140A(4) will apply to a transfer of assets. CG45703 sets out the particular conditions which have to be met before section 140A can apply to a partial division and includes references to the three differences between a transfer of assets and partial divisions. CG45704 explains one of the conditions mentioned in CG45703 and CG45705 explains the other conditions common to a transfer of assets and a partial division.

The particular conditions which have to be met before section 140A(4) can apply to a transfer of assets are;

  1. There is a transfer of the whole or part of a trade carried on in the UK from a company resident in one member state to a company resident in another member state, section 140A(1)(a),
  2. The business must be carried on in the UK; section 140A(1)(a).
  3. The transfer must be wholly in exchange for shares or debentures issued by the transferee company to the transferor company; section 140A(1)(b). Note that assumption of trade liabilities by the transferee(s) should not be regarded as separate consideration given by that company.
  4. The conditions set out in CG45705 below are met; section 140A(1)(e) and section 140A(3).
  5. A claim is made by the transferor and the transferee; section 140A(1)(c).
  6. The anti avoidance rule in section 140B, see CG45731 does not apply; section 140A(1)(d).