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HMRC internal manual

Double Taxation Relief Manual

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HM Revenue & Customs
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Non-residents: UK income: European Community Mergers

In 1990 the European Community Council of Ministers adopted a Directive, known as the Mergers Directive (90/434/EEC), which affected the tax consequences of cross-border mergers and demergers, transfers of assets and share exchanges. Relevant United Kingdom legislation was enacted in F2A92/S44 - F2A92/S50 and F2A92/S67. These provisions, which generally take effect from 1 January 1992, cover two basic situations: the transfer of a United Kingdom trade, or part trade, between companies resident in different European Community Member States; and the transfer of a non-United Kingdom trade or part trade from a United Kingdom resident company to a company resident in another European Community Member State. In the first situation, the transfer may be treated as giving rise neither to a gain nor to a loss. In the second situation, the gain realised by the United Kingdom resident company is computed and double taxation relief may be allowed for foreign tax which is not payable but which would have been charged in the Member State where the branch is situated but for the provisions of the Mergers Directive. For detailed instructions see CG45700 to GC45739.