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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Investment trusts: transfer of assets: scheme of reconstruction

TCGA92/S139(4) and TCGA92/S101

Section 139 TCGA 1992 allows for the transfer of a business, or part of a business, from one company to another under a scheme of reconstruction at a tax value that results in neither a gain nor a loss. But section 139(4) TCGA 1992 prevents that rule from applying where the company to which the transfer is made is an approved investment trust.This is because gains made by an approved investment trust are not chargeable gains.

If the section 139 TCGA 1992 no gain/no loss transfer is made to a company that, at the time of the transfer, was not an approved investment trust, but

  • at any time after the transfer becomes an approved investment trust for an accounting period, and
  • at the beginning of that accounting period the company still owns any of the assets of the business transferred

then section 101 TCGA 1992 applies.

Section 101 TCGA 1992 deems the company to which the transfer was made to have sold and reacquired the assets at their market value immediately after the transfer. The resulting chargeable gain or allowable loss is then deemed to accrue at the end of the last accounting period before the one in which the company becomes an approved investment trust.

An assessment for this purpose may be made at any time up to six years after the end of the accounting period in which the company became an approved investment trust. Any recomputations of liability in respect of other disposals, or adjustments of tax, that may be necessary as a result of the application of section 101 TCGA 1992 must also be made.