Subject to section 130(2), where for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of any part of the new holding it is necessary to apportion the cost of acquisition of any of the original shares between what is disposed of and what is retained, the apportionment shall be made by reference to market value at the date of the disposal (with such adjustment of the market value of any part of the new holding as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned).
(1) This section shall apply to a new holding—
(a) if it consists of more than one class of shares in or debentures of the company and one or more of those classes is of shares or debentures which, at any time not later than the end of the period of 3 months beginning with the date on which the reorganisation took effect, or of such longer period as the Board may by notice allow, were listed on a recognised stock exchange ... , or
(b) if it consists of more than one class of rights of unit holders and one or more of those classes is of rights the prices of which were published daily by the managers of the scheme at any time not later than the end of that period of 3 months (or longer if so allowed).
(2) Where for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of the whole or any part of any class of shares or debentures or rights of unit holders forming part of a new holding to which this section applies it is necessary to apportion costs of acquisition between what is disposed of and what is retained, the cost of acquisition of the new holding shall first be apportioned between the entire classes of shares or debentures or rights of which it consists by reference to market value on the first day (whether that day fell before the reorganisation took effect or later) on which market values or prices were quoted or published for the shares, debentures or rights as mentioned in subsection (1)(a) or (1)(b) above (with such adjustment of the market value of any class as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned).
(3) For the purposes of this section the day on which a reorganisation involving the allotment of shares or debentures or unit holders’ rights takes effect is the day following the day on which the right to renounce any allotment expires.
(1) This section applies where—
(a) by virtue of section 127, on a reorganisation the original shares (taken as a single asset) and the new holding (taken as a single asset) fall to be treated as the same asset acquired as the original shares were acquired; and
(b) on the reorganisation, a person gives or becomes liable to give any consideration for his new holding or any part of it.
(2) Where this section applies, so much of the consideration referred to in subsection (1)(b) above as, on a disposal to which section 53 applies of the new holding, will, by virtue of section 128(1), be treated as having been given for the original shares, shall be treated for the purposes of section 54 as an item of relevant allowable expenditure incurred not at the time the original shares were acquired but at the time the person concerned gave or became liable to give the consideration (and, accordingly, section 54(4) shall not apply in relation to that item of expenditure).
132 Equation of converted securities and new holding.
(1) Sections 127 to 131 shall apply with any necessary adaptations in relation to the conversion of securities as they apply in relation to a reorganisation (that is to say, a reorganisation or reduction of a company’s share capital).
(2) This section has effect subject to sections 133 and 134.
(3) For the purposes of this section and section 133—
(a) “conversion of securities” includes any of the following, whether effected by a transaction or occurring in consequence of the operation of the terms of any security or of any debenture which is not a security, that is to say—
(i) a conversion of securities of a company into shares in the company, and
(ia) a conversion of a security which is not a qualifying corporate bond into a security of the same company which is such a bond, and
(ib) a conversion of a qualifying corporate bond into a security which is a security of the same company but is not such a bond, and
(ii) a conversion at the option of the holder of the securities converted as an alternative to the redemption of those securities for cash, and
(iii) any exchange of securities effected in pursuance of any enactment (including an enactment passed after this Act) which provides for the compulsory acquisition of any shares or securities and the issue of securities or other securities instead,
(b) “security” includes any loan stock or similar security whether of the Government of the United Kingdom or of any other government, or of any public or local authority in the United Kingdom or elsewhere, or of any company, and whether secured or unsecured.
(4) In subsection (3)(a)(ia) above the reference to the conversion of a security of a company into a qualifying corporate bond includes a reference to—
(a) any such conversion of a debenture of that company that is deemed to be a security for the purposes of section 251 as produces a security of that company which is a qualifying corporate bond; and
(b) any such conversion of a security of that company, or of a debenture that is deemed to be a security for those purposes, as produces a debenture of that company which, when deemed to be a security for those purposes, is such a bond.
(5) In subsection (3)(a)(ib) above the reference to the conversion of a qualifying corporate bond into a security of the same company which is not such a bond includes a reference to any conversion of a qualifying corporate bond which produces a debenture which—
(a) is not a security; and
(b) when deemed to be a security for the purposes of section 251, is not such a bond.
(1) This section applies where, on a conversion of securities, a person receives, or becomes entitled to receive, any sum of money (“the premium”) which is by way of consideration (in addition to his new holding) for the disposal of the converted securities.
(2) If ... the premium is small, as compared with the value of the converted securities, ...—
(a) receipt of the premium shall not be treated for the purposes of this Act as a disposal of part of the converted securities, and
(b) the premium shall be deducted from any expenditure allowable under this Act as a deduction in computing a gain or loss on the disposal of the new holding by the person receiving or becoming entitled to receive the premium.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Where the allowable expenditure is less than the premium (or is nil)—
(a) subsection (2) above shall not apply, and
(b) if the recipient so elects (and there is any allowable expenditure)—
(i) the amount of the premium shall be reduced by the amount of the allowable expenditure, and
(ii) none of that expenditure shall be allowable as a deduction in computing a gain accruing on the occasion of the conversion, or on any subsequent occasion.
(5) In subsection (4) above “allowable expenditure” means expenditure which immediately before the conversion was attributable to the converted securities under paragraphs (a) and (b) of section 38(1).
(1) This section has effect where gilt-edged securities are exchanged for shares in pursuance of any enactment (including an enactment passed after this Act) which provides for the compulsory acquisition of any shares and the issue of gilt-edged securities instead.
(2) The exchange shall not constitute a conversion of securities within section 132 and shall be treated as not involving any disposal of the shares by the person from whom they were compulsorily acquired but—
(a) there shall be calculated the gain or loss that would have accrued to him if he had then disposed of the shares for a consideration equal to the value of the shares as determined for the purpose of the exchange, and
(b) on a subsequent disposal of the whole or part of the gilt-edged securities by the person to whom they were issued—
(i) there shall be deemed to accrue to him the whole or a corresponding part of the gain or loss mentioned in paragraph (a) above, and
(ii) section 115(1) shall not have effect in relation to any gain or loss that is deemed to accrue as aforesaid.
(3) Where a person to whom gilt-edged securities of any kind were issued as mentioned in subsection (1) above disposes of securities of that kind, the securities of which he disposes—
(a) shall, so far as possible, be identified with securities which were issued to him as mentioned in subsection (1) above rather than with other securities of that kind, and
(b) subject to paragraph (a) above, shall be identified with securities issued at an earlier time rather than those issued at a later time.
(4) Subsection (2)(b) above shall not apply to any disposal falling within the provisions of section 58(1), 62(4) or 171(1) but a person who has acquired the securities on a disposal falling within those provisions (and without there having been a previous disposal not falling within those provisions or a devolution on death) shall be treated for the purposes of subsections (2)(b) and (3) above as if the securities had been issued to him.
(5) Where the gilt-edged securities to be exchanged for any shares are not issued until after the date on which the shares are compulsorily acquired but on that date a right to the securities is granted, this section shall have effect as if the exchange had taken place on that date, as if references to the issue of the securities and the person to whom they were issued were references to the grant of the right and the person to whom it was granted and references to the disposal of the securities included references to disposals of the rights.
(6) In this section “shares” includes securities within the meaning of section 132.
(7) This section does not apply where the compulsory acquisition took place before 7th April 1976.
135 Exchange of securities for those in another company
(1) This section applies in the following circumstances where a company (“company B”) issues shares or debentures to a person in exchange for shares in or debentures of another company (“company A”).
(2) The circumstances are:
Case 1
Where company B holds, or in consequence of the exchange will hold, more than 25% of the ordinary share capital of company A.
Case 2
Where company B issues the shares or debentures in exchange for shares as the result of a general offer—
made to members of company A or any class of them (with or without exceptions for persons connected with company B), and
made in the first instance on a condition such that if it were satisfied company B would have control of company A.
Case 3
Where company B holds, or in consequence of the exchange will hold, the greater part of the voting power in company A.
(3) Where this section applies, sections 127 to 131 (share reorganisations etc) apply with the necessary adaptations as if company A and company B were the same company and the exchange were a reorganisation of its share capital.
(4) In this section “ordinary share capital” has the meaning given by section 1119 of CTA 2010 and also includes—
(a) in relation to a unit trust scheme, any rights that are treated by section 99(1)(b) of this Act (application of Act to unit trust schemes) as shares in a company, and
(b) in relation to a company that has no share capital, any interests in the company possessed by members of the company.
(5) This section applies in relation to a company that has no share capital as if references to shares in or debentures of the company included any interests in the company possessed by members of the company.
(6) This section has effect subject to section 137 (anti-avoidance).
136 Scheme of reconstruction involving issue of securities
(1) This section applies where—
(a) an arrangement between a company (“company A”) and—
(i) the persons holding shares in or debentures of the company, or
(ii) where there are different classes of shares in or debentures of the company, the persons holding any class of those shares or debentures,
is entered into for the purposes of, or in connection with, a scheme of reconstruction, and
(b) under the arrangement—
(i) another company (“company B”) issues shares or debentures to those persons in respect of and in proportion to (or as nearly as may be in proportion to) their relevant holdings in company A, and
(ii) the shares in or debentures of company A comprised in relevant holdings are retained by those persons or are cancelled or otherwise extinguished.
(2) Where this section applies—
(a) those persons are treated as exchanging their relevant holdings in company A for the shares or debentures held by them in consequence of the arrangement, and
(b) sections 127 to 131 (share reorganisations etc) apply with the necessary adaptations as if company A and company B were the same company and the exchange were a reorganisation of its share capital.
For this purpose shares in or debentures of company A comprised in relevant holdings that are retained are treated as if they had been cancelled and replaced by a new issue.
(3) Where a reorganisation of the share capital of company A is carried out for the purposes of the scheme of reconstruction, the provisions of subsections (1) and (2) apply in relation to the position after the reorganisation.
(4) In this section—
(a) “scheme of reconstruction” has the meaning given by Schedule 5AA to this Act;
(b) references to “relevant holdings” of shares in or debentures of company A are—
(i) where there is only one class of shares in or debentures of the company, to holdings of shares in or debentures of the company, and
(ii) where there are different classes of shares in or debentures of the company, to holdings of a class of shares or debentures that is involved in the scheme of reconstruction (within the meaning of paragraph 2 of Schedule 5AA);
(c) references to shares or debentures being retained include their being retained with altered rights or in an altered form, whether as the result of reduction, consolidation, division or otherwise; and
(d) any reference to a reorganisation of a company’s share capital is to a reorganisation within the meaning of section 126.
(5) This section applies in relation to a company that has no share capital as if references to shares in or debentures of the company included any interests in the company possessed by members of the company.
(6) This section has effect subject to section 137 (anti-avoidance).
137 Restriction on application of sections 135 and 136 : anti-avoidance.
(1) This section applies in respect of arrangements relating to an exchange or scheme of reconstruction as regards which section 135 or 136 applies if the main purpose, or one of the main purposes, of the arrangements is to reduce or avoid liability to capital gains tax or corporation tax.
(1A) Any such reduction or avoidance that would (in the absence of this section) arise from such arrangements is to be counteracted by the making of such adjustments as are just and reasonable (in light of the reduction or avoidance).
(1B) This includes, in an appropriate case, disapplying section 135 or 136 insofar as is required to counteract the reduction or avoidance.
(1C) Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of—
(a) an assessment, or
(b) the modification of an assessment.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) If any tax assessed on a person (the chargeable person) by virtue of this section is not paid within 6 months from the date when it is payable, any other person who—
(a) holds all or any part of the shares or debentures that were issued to the chargeable person as part of the exchange or scheme of reconstruction, and
(b) has acquired them without there having been, since their acquisition by the chargeable person, any disposal of them not falling within section 58(1) or 171,
may, at any time within 2 years from the time when the tax became payable, be assessed and charged (in the name of the chargeable person) to all or, as the case may be, a corresponding part of the unpaid tax; and a person paying any amount of tax under this subsection shall be entitled to recover a sum of that amount from the chargeable person.
(5) With respect to chargeable gains accruing in chargeable periods ending after such day as the Treasury may by order appoint, in subsection (4) above—
(a) for the words “the date when it is payable" there shall be substituted “ the date determined under subsection (4A) below ”;
(b) for the words “the time when the tax became payable" there shall be substituted “ that date ”; and
(c) for the words “a sum" onwards there shall be substituted “ from the chargeable person a sum equal to that amount together with any interest paid by him under section 87A of the Management Act on that amount ”;
and after that subsection there shall be inserted—
(4A) The date referred to in subsection (4) above is whichever is the later of—
(a) the date when the tax becomes due and payable by the chargeable person; and
(b) the date when the assessment was made on the chargeable person.
(6) In this section references to shares or debentures include references to any interests or options to which this Chapter applies by virtue of section 135(5), 136(5) or 147.
(7) In this section, “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(1) Section 137 does not apply in any case where, before the issue of shares or debentures mentioned in section 135(1) or 136(1) is made, the Board have, on the application of either company mentioned in section 135(1) or 136(1), notified the company that the Board are satisfied that the exchange or scheme of reconstruction will be effected without arrangements in respect of which section 137 applies.
(2) Any application under subsection (1) above shall be in writing and shall contain particulars of the operations that are to be effected and the Board may, within 30 days of the receipt of the application or of any further particulars previously required under this subsection, by notice require the applicant to furnish further particulars for the purpose of enabling the Board to make their decision; and if any such notice is not complied with within 30 days or such longer period as the Board may allow, the Board need not proceed further on the application.
(3) The Board shall notify their decision to the applicant within 30 days of receiving the application or, if they give a notice under subsection (2) above, within 30 days of the notice being complied with.
(4) If the Board notify the applicant that they are not satisfied as mentioned in subsection (1) above or do not notify their decision to the applicant within the time required by subsection (3) above, the applicant may within 30 days of the notification or of that time require the Board to transmit the application, together with any notice given and further particulars furnished under subsection (2) above, to the tribunal; and in that event any notification by the tribunal shall have effect for the purposes of subsection (1) above as if it were a notification by the Board.
(5) If any particulars furnished under this section do not fully and accurately disclose all facts and considerations material for the decision of the Board or the tribunal, any resulting notification that the Board or the tribunal are satisfied as mentioned in subsection (1) above shall be void.
(6) In this section, references to shares or debentures include references to any interests or options to which this Chapter applies by virtue of section 135(5), 136(5) or 147.
138ZA Share exchanges involving non-UK incorporated close companies
(1) Section 138ZB applies where—
(a) section 135 or 136 applies to an issue by a company (“company B”) of shares in or debentures of that company (“the exchanged shares or debentures”) in exchange for or in respect of shares in or debentures of another company (“company A”),
(b) immediately before the issue is made, company A is a close company which is incorporated in the United Kingdom (whether or not it is resident in the United Kingdom),
(c) immediately after the issue is made, company B is a close company which is not incorporated in the United Kingdom (whether or not it is resident in the United Kingdom), and
(d) the person to whom the exchanged shares or debentures are issued (“P”) is an individual who meets the conditions in subsection (2).
(2) Those conditions are that—
(a) immediately before the issue is made, P—
(i) has a material interest in company A, and
(ii) is a participator in company A, and
(b) immediately after the issue is made, P—
(i) has a material interest in company B, and
(ii) is a participator in company B.
(3) A person has a material interest in a company for the purposes of this section if condition A or B is met.
(4) Condition A is that the person, an associate of the person, or the person or an associate of the person together with one or more associates is—
(a) the beneficial owner of, or
(b) directly or indirectly able to control,
more than 5% of the ordinary share capital of the company.
(5) Condition B is that the person, an associate of the person, or the person or an associate of the person together with one or more associates possesses or is entitled to acquire such rights as would—
(a) in the event of the winding up of the company, or
(b) in any other circumstances,
give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators.
(6) Chapter 2 of Part 10 of CTA 2010 (meaning of “close company” and related terms) applies for the purposes of this section but with the omission of section 442(a) (exclusion of non-UK resident companies).
(7) In relation to a company that has no share capital, this section applies as if—
(a) references to shares in, or debentures of, the company included any interests of the company possessed by members of the company, and
(b) the reference in subsection (4) to the ordinary share capital of the company were to all such interests.
(8) In this section “ordinary share capital” has the meaning it has in the Corporation Tax Acts (see section 1119 of CTA 2010).
138ZB Treatment of securities connected with such exchanges
(1) Where this section applies (see section 138ZA), a security falling within subsection (2) is to be treated for the purposes of this Act as situated in the United Kingdom (whether or not it would otherwise be so treated) if—
(a) it is held by P, other than as a result of a disposal of the security by P’s spouse or civil partner (“S”) to P to which section 58 (no loss or gain on disposals between spouses or civil partners) did not apply, or
(b) is held by S, other than as a result of a disposal of the security by P to S to which that section did not apply.
(2) Those securities are as follows—
(a) the exchanged shares or debentures;
(b) a security of company B acquired by P on or after the day on which the exchanged shares or debentures are issued;
(c) where—
(i) there is a repo (within the meaning of section 263A) in respect of a security, and
(ii) that security falls within any of the paragraphs of this subsection (including this paragraph),
any similar security (see section 263AA(5) and (6)) that P, or a person connected with P, buys back under the repo;
(d) where—
(i) P transfers a security to another person under a stock lending arrangement (within the meaning of section 263B), and
(ii) that security falls within any of the paragraphs of this subsection (including this paragraph),
any security of a similar description (see section 263B(6)) transferred back to P under the arrangement;
(e) a security of a company issued to P where—
(i) the security is issued in exchange for, or in respect of, another security,
(ii) section 135 or 136 applies to that issue,
(iii) the other security falls within any of the paragraphs of this subsection (including this paragraph), and
(iv) P has a material interest in the company (within the meaning of section 138ZA(3));
(f) where a security of a company, other than company B, falls within paragraph (e), a security of that company acquired by P on or after the first day on which a security of that company fell within that paragraph.
(3) For the purposes of paragraphs (b), (f) and (e) of subsection (2), it does not matter whether or not—
(a) consideration was given for the security acquired by P, or
(b) the security acquired by P is of a different class from the exchanged shares or debentures.
(4) If S acquires a security falling within subsection (2) as a result of a disposal by P to which section 58 applies, subsections (2) and (3) have effect, from the time of its acquisition by S (whether or not S continues to hold it), as if every reference to “P” were to “P or S”.
(5) In this section—
“company B”, “P”, and “the exchanged shares or debentures” are to be construed in accordance with section 138ZA;
“security” means—
shares in, or debentures of, a company, or
interests of a company that has no share capital that are possessed by members of the company.
(1) This section applies where section 138ZB would, but for an election under this section, apply in relation to the issue by a company of shares in or debentures of that company in exchange for, or in respect of, shares in or debentures of another company.
(2) The person to whom the shares or debentures are issued may elect for section 135 or 136 not to apply to the issue, and accordingly—
(a) the exchange or scheme of reconstruction in question will not be treated as a reorganisation within the meaning of section 126, and
(b) section 138ZB will not apply in relation to the issue.
(3) An election under this section must be made on or before the first anniversary of the 31 January following the tax year in which the shares or debentures are issued.
138A Use of earn-out rights for exchange of securities.
(1) For the purposes of this section an earn-out right is so much of any right conferred on any person (“the seller”) as—
(a) constitutes the whole or any part of the consideration for the transfer by him of shares in or debentures of a company (“the old securities”);
(b) consists in a right to be issued with shares in or debentures of another company (“the new company”);
(c) is such that the value or quantity of the shares or debentures to be issued in pursuance of the right (“the new securities”) is unascertainable at the time when the right is conferred; and
(d) is not capable of being discharged in accordance with its terms otherwise than by the issue of the new securities.
(2) Where—
(a) there is an earn-out right, and
(b) the exchange of the old securities for the earn-out right is an exchange to which section 135 would apply, in a manner unaffected by section 137, if the earn-out right were an ascertainable amount of shares in or debentures of the new company, ...
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
this Act shall have effect, in the case of the seller and every other person who from time to time has the earn-out right, in accordance with the assumptions specified in subsection (3) below.
(2A) Subsection (2) above does not have effect if the seller elects under this section for the earn-out right not to be treated as a security of the new company.
(3) Those assumptions are—
(a) that the earn-out right is a security within the definition in section 132;
(b) that the security consisting in the earn-out right is a security of the new company and is incapable of being a qualifying corporate bond for the purposes of this Act;
(c) that references in this Act (including those in this section) to a debenture include references to a right that is assumed to be a security in accordance with paragraph (a) above; and
(d) that the issue of shares or debentures in pursuance of such a right constitutes the conversion of the right, in so far as it is discharged by the issue, into the shares or debentures that are issued.
(4) For the purposes of this section where—
(a) any right which is assumed, in accordance with this section, to be a security of a company (“the old right”) is extinguished,
(b) the whole of the consideration for the extinguishment of the old right consists in another right (“the new right”) to be issued with shares in or debentures of that company,
(c) the new right is such that the value or quantity of the shares or debentures to be issued in pursuance of the right (“the replacement securities”) is unascertainable at the time when the old right is extinguished, and
(d) the new right is not capable of being discharged in accordance with its terms otherwise than by the issue of the replacement securities, ...
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the assumptions specified in subsection (3) above shall have effect in relation to the new right, in the case of the person on whom the new right is conferred and every other person who from time to time has the new right, as they had effect in relation to the old right.
(4A) Subsection (4) above does not have effect if the person on whom the new right is conferred elects under this section for it not to be treated as a security of the new company.
(5) An election under this section in respect of any right must be made, by a notice given to an officer of the Board—
(a) in the case of an election by a company within the charge to corporation tax, within the period of two years from the end of the accounting period in which the right is conferred; and
(b) in any other case, on or before the first anniversary of the 31st January next following the year of assessment in which that right is conferred.
(6) An election under this section shall be irrevocable.
(7) Subject to subsections (8) to (10) below, where any right to be issued with shares in or debentures of a company is conferred on any person, the value or quantity of the shares or debentures to be issued in pursuance of that right shall be taken for the purposes of this section to be unascertainable at a particular time if, and only if—
(a) it is made referable to matters relating to any business or assets of one or more relevant companies; and
(b) those matters are uncertain at that time on account of future business or future assets being included in the business or assets to which they relate.
(8) Where a right to be issued with shares or debentures is conferred wholly or partly in consideration for the transfer of other shares or debentures or the extinguishment of any right, the value and quantity of the shares or debentures to be issued shall not be taken for the purposes of this section to be unascertainable in any case where, if—
(a) the transfer or extinguishment were a disposal, and
(b) a gain on that disposal fell to be computed in accordance with this Act,
the shares or debentures to be issued would, in pursuance of section 48, be themselves regarded as, or as included in, the consideration for the disposal.
(9) Where any right to be issued with shares in or debentures of a company comprises an option to choose between shares in that company and debentures of that company, the existence of that option shall not, by itself, be taken for the purposes of this section either—
(a) to make unascertainable the value or quantity of the shares or debentures to be issued; or
(b) to prevent the requirements of subsection (1)(b) and (d) or (4)(b) and (d) above from being satisfied in relation to that right.
(10) For the purposes of this section the value or quantity of shares or debentures shall not be taken to be unascertainable by reason only that it has not been fixed if it will be fixed by reference to the other and the other is ascertainable.
(11) In subsection (7) above “relevant company”, in relation to any right to be issued with shares in or debentures of a company, means—
(a) that company or any company which is in the same group of companies as that company; or
(b) the company for whose shares or debentures that right was or was part of the consideration, or any company in the same group of companies as that company;
and in this subsection the reference to a group of companies shall be construed in accordance with section 170(2) to (14).
139 Reconstruction ... involving transfer of business.
(1) Subject to the provisions of this section, where—
(a) any scheme of reconstruction ... involves the transfer of the whole or part of a company’s business to another company, and
(b) the conditions in subsection (1A) below are met in relation to the assets included in the transfer, and
(c) the first-mentioned company receives no part of the consideration for the transfer (otherwise than by the other company taking over the whole or part of the liabilities of the business),
then, so far as relates to corporation tax on chargeable gains, the 2 companies shall be treated as if any assets included in the transfer were acquired by the one company from the other company for a consideration of such amount as would secure that on the disposal by way of transfer neither a gain nor a loss would accrue to the company making the disposal, and for the purposes of Schedule 2 the acquiring company shall be treated as if the respective acquisitions of the assets by the other company had been the acquiring company’s acquisition of them.
(1A) The conditions referred to in subsection (1)(b) above are—
(a) that the company acquiring the assets is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets ... in relation to that company immediately after that time, and
(b) that the company from which the assets are acquired is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets ... in relation to that company immediately before that time.
For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain chargeable to corporation tax as a result of section 2B(3) or (4).
(1AA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1B) Nothing in section 179(3D) prevents the two companies being treated as mentioned in subsection (1).
(2) This section does not apply in relation to an asset which, until the transfer, formed part of trading stock of a trade carried on by the company making the disposal, or in relation to an asset which is acquired as trading stock for the purposes of a trade carried on by the company acquiring the asset.
Section 170(1) applies for the purposes of this subsection.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) This section does not apply in the case of a transfer of the whole or part of a company’s business to a unit trust scheme to which section 100(2) applies or which is an authorised unit trust or to an investment trust or a venture capital trust.
(4A) Subsection (4B) applies in respect of arrangements relating to a reconstruction as regards which this section applies if the main purpose, or one of the main purposes, of the arrangements is to reduce or avoid liability to capital gains tax, corporation tax or income tax.
(4B) Any such reduction or avoidance that would (in the absence of this subsection) arise from such arrangements is to be counteracted by the making of such adjustments as are just and reasonable (in light of the reduction or avoidance).
(4C) This includes, in an appropriate case, disapplying this section insofar as is required to counteract the reduction or avoidance.
(4D) Any adjustments required to be made under subsection (4B) (whether or not by an officer of Revenue and Customs) may be made by way of—
(a) an assessment, or
(b) the modification of an assessment.
(5) Subsections (4A) to (4D) do not apply in any case where, before the transfer, the Board have, on the application of the acquiring company, notified the company that the Board are satisfied that the reconstruction ... will be effected without arrangements in respect of which subsection (4B) applies.
Subsections (2) to (5) of section 138 shall have effect in relation to this subsection as they have effect in relation to subsection (1) of that section.
(6) Where, if the company making the disposal had not been wound up, tax could have been assessed on it by virtue of subsection (4B) above, that tax may be assessed and charged (in the name of the company making the disposal) on the company to which the disposal is made.
(7) If any tax assessed on a company (“the chargeable company”) by virtue of subsection (4B) or (6) above is not paid within 6 months from the date when it is payable, any other person who—
(a) holds all or any part of the assets in respect of which the tax is charged; and
(b) either is the company to which the disposal was made or has acquired the assets without there having been any subsequent disposal not falling within this section or section 171,
may, within 2 years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or, as the case may be, a corresponding part of the unpaid tax; and a person paying any amount of tax under this section shall be entitled to recover a sum of that amount from the chargeable company.
(8) With respect to chargeable gains accruing in chargeable periods ending after such day as the Treasury may by order appoint, in subsection (7) above—
(a) for the words “when it is payable" there shall be substituted “ when it is due and payable or, if later, the date when the assessment is made on the company ”;
(b) for the words “the time when the tax became payable" there shall be substituted “ the later of those dates ”; and
(c) for the words “a sum" onwards there shall be substituted “ from the chargeable company a sum equal to that amount together with any interest paid by him under section 87A of the Management Act on that amount ”.
(9) In this section “scheme of reconstruction” has the same meaning as in section 136.
(10) In this section, “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
140 Postponement of charge on transfer of assets to non-resident company.
(1) This section applies where a company resident in the United Kingdom carries on a trade outside the United Kingdom through a permanent establishment and—
(a) that trade, or part of it, together with the whole assets of the company used for the purposes of the trade or part (or together with the whole of those assets other than cash) is transferred to a company not resident in the United Kingdom;
(b) the trade or part is so transferred wholly or partly in exchange for securities consisting of shares, or of shares and loan stock, issued by the transferee company to the transferor company;
(c) the shares so issued, either alone or taken together with any other shares in the transferee company already held by the transferor company, amount in all to not less than one quarter of the ordinary share capital of the transferee company; and
(d) either no allowable losses accrue to the transferor company on the transfer or the aggregate of the chargeable gains so accruing exceeds the aggregate of the allowable losses so accruing;
and also applies in any case where section 268A of the Income and Corporation Taxes Act 1970 applied unless the deferred gain had been wholly taken into account in accordance with that section before the coming into force of this section.
Section 170(1) shall apply for the purposes of this section.
(2) In any case to which this section applies the transferor company may claim that this Act shall have effect in accordance with the following provisions.
(3) Any allowable losses accruing to the transferor company on the transfer shall be set off against the chargeable gains so accruing and the transfer shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses and—
(a) if the securities are the whole consideration for the transfer, the whole of that gain shall be treated as not accruing to the transferor company on the transfer but an equivalent amount (“the deferred gain”) shall be brought into account in accordance with subsections (4) and (5) below;
(b) if the securities are not the whole of that consideration—
(i) paragraph (a) above shall apply to the appropriate proportion of that gain; and
(ii) the remainder shall be treated as accruing to the transferor company on the transfer.
In paragraph (b)(i) above “the appropriate proportion” means the proportion that the market value of the securities at the time of the transfer bears to the market value of the whole of the consideration at that time.
(4) If at any time after the transfer the transferor company disposes of the whole or part of the securities held by it immediately before that time, there shall be deemed to accrue to the transferor company as a chargeable gain on that occasion the whole or the appropriate proportion of the deferred gain so far as not already taken into account under this subsection or subsection (5) below.
In this subsection “the appropriate proportion” means the proportion that the market value of the part of the securities disposed of bears to the market value of the securities held immediately before the disposal.
(4A) A chargeable gain which is deemed to accrue under subsection (4) is in addition to any gain or loss that actually accrues to the transferor company on the disposal of the securities.
(4B) In determining whether a chargeable gain is deemed to accrue under subsection (4), any disapplication of section 127 by paragraph 4(3)(a) of Schedule 7AC in a case in which that section would otherwise have applied shall be disregarded.
(5) If at any time within 6 years after the transfer the transferee company disposes of the whole or part of the relevant assets held by it immediately before that time there shall be deemed to accrue to the transferor company as a chargeable gain on that occasion the whole or the appropriate proportion of the deferred gain so far as not already taken into account under this subsection or subsection (4) above.
In this subsection “relevant assets” means assets the chargeable gains on which were taken into account in arriving at the deferred gain and “the appropriate proportion” means the proportion which the chargeable gain so taken into account in respect of the part of the relevant assets disposed of bears to the aggregate of the chargeable gains so taken into account in respect of the relevant assets held immediately before the time of the disposal.
(6) There shall be disregarded—
(a) for the purposes of subsection (4) above any disposal to which section 171 applies; and
(b) for the purposes of subsection (5) above any disposal to which that section would apply if subsections (1)(b) and (1A) of that section and section 170(9) were disregarded;
and where a person acquires securities or an asset on a disposal disregarded for the purposes of subsection (4) or (5) above (and without there having been a previous disposal not so disregarded) a disposal of the securities or asset by that person shall be treated as a disposal by the transferor or, as the case may be, transferee company.
(6A) No claim may be made under this section as regards a transfer in relation to which a claim is made under section 140C.
(6AA) If securities are transferred by a transferor company as part of the process of the transfer of a business to which section 140A or 140C applies—
(a) the transfer shall be disregarded for the purposes of subsection (4), and
(b) the transferee company shall be treated as if it were the transferor company in relation to—
(i) any subsequent disposal of the securities, and
(ii) any subsequent disposal by the transferee of assets to which subsection 5 applies.
(6B) If securities are transferred by a transferor as part of the process of a merger to which section 140E applies—
(a) the transfer shall be disregarded for the purposes of subsection (4), and
(b) the transferee shall be treated as if it were the transferor in relation to—
(i) any subsequent disposal of the securities, and
(ii) any subsequent disposal by the transferee of assets to which subsection (5) applies.
(6C) In subsection (6B) “transferor” and “transferee” have the meaning given by section 140E(9).
(7) If in the case of any such transfer as was mentioned in section 268(1) of the Income and Corporation Taxes Act 1970 there were immediately before the coming into force of this section chargeable gains which by virtue of section 268(2) and 268A(8) of that Act were treated as not having accrued to the transferor company, subsection (4) above shall (without any claim in that behalf) apply to the aggregate of those gains as if references to the deferred gain were references to that aggregate and as if references to the transfer and the securities were references to the transfer and the shares, or shares and loan stock, mentioned in section 268(1).
(8) If in the case of any such transfer as was mentioned in section 268A(1) of the Income and Corporation Taxes Act 1970 there were immediately before the coming into force of this section deferred gains which by virtue of section 268A(3) were treated as not having accrued to the transferor company, subsections (4) and (5) above shall (without any claim in that behalf) apply to those deferred gains as they apply to gains deferred by virtue of subsection (3) above (as if the references to the transfer and the securities were references to the transfer and securities mentioned in section 268A(1)).
(1) This section applies where—
(a) a company resident in one relevant state (the transferor) transfers the whole or part of a business carried on by it in the United Kingdom to a company resident in another relevant state (the transferee),
(b) the transfer is wholly in exchange for shares or debentures issued by the transferee to the transferor,
(c) a claim is made under this section by the transferor and the transferee,
(d) section 140B does not prevent this section applying, and
(e) the appropriate condition is met in relation to the transferee immediately after the time of the transfer.
(1A) This section also applies where a company transfers part of its business to one or more companies if—
(a) the transferor is resident in one relevant state,
(b) the part of the transferor’s business which is to be transferred is carried on by the transferor in the United Kingdom,
(c) at least one transferee is resident in a relevant state other than that in which the transferor is resident,
(d) the transferor company continues to carry on a business after the transfer,
(e) the conditions in subsection (1)(c) to (e) are satisfied (for which purpose references to the transferee shall be taken as references to each of the transferees), and
(f) either of the following conditions is satisfied.
(1B) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor.
(1C) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of a member State preventing the issue of shares or debentures to itself.
(1D) If Condition 2 applies in relation to the whole or part of a transfer, sections 24 and 122 do not apply in relation to the transfer.
(2) Where immediately after the time of the transfer the transferee (or each of the transferees) is not resident in the United Kingdom, the appropriate condition is that were it to dispose of the assets included in the transfer any chargeable gains accruing to it on the disposal would form part of its chargeable profits for corporation tax purposes by virtue of section 2B(3).
(3) Where immediately after the time of the transfer the transferee (or each of the transferees) is resident in the United Kingdom, the appropriate condition is that none of the assets included in the transfer is one in respect of which, by virtue of the asset being of a description specified in double taxation relief arrangements, the company falls to be regarded for the purposes of the arrangements as not liable in the United Kingdom to tax on gains accruing to it on a disposal.
(4) Where this section applies—
(a) the transferor and the transferee (or each of the transferees) shall be treated, so far as relates to corporation tax on chargeable gains, as if any assets included in the transfer were acquired by the transferee (or each of the transferees) from the transferor for a consideration of such amount as would secure that on the disposal by way of transfer neither a gain nor a loss would accrue to the transferor;
(b) section 25(3) shall not apply to any such assets by reason of the transfer (if it would apply apart from this paragraph).
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Section 140A shall not apply unless the transfer of the business or part is effected for bona fide commercial reasons and does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of liability to income tax, corporation tax or capital gains tax.
(2) Subsection (1) above shall not apply where, before the transfer, the Board have on the application of the transferor and the transferee (or each of the transferees) notified those companies that the Board are satisfied that the transfer will be effected for bona fide commercial reasons and will not form part of any such scheme or arrangements as are mentioned in that subsection.
(3) Subsections (2) to (5) of section 138 shall have effect in relation to subsection (2) above as they have effect in relation to subsection (1) of that section.
(1) This section applies where—
(a) a company resident in the United Kingdom (the transferor) transfers to a company resident in a member State (the transferee) the whole or part of a business which, immediately before the time of the transfer, the transferor carried on in a member State ... through a permanent establishment,
(b) the transfer includes the whole of the assets of the transferor used for the purposes of the business or part (or the whole of those assets other than cash),
(c) the transfer is wholly or partly in exchange for shares or debentures issued by the transferee to the transferor,
(d) the aggregate of the chargeable gains accruing to the transferor on the transfer exceeds the aggregate of the allowable losses so accruing,
(e) a claim is made under this section by the transferor, and
(f) section 140D does not prevent this section applying.
(1A) This section also applies where a company resident in the United Kingdom transfers part of its business to one or more companies if—
(a) the part of the transferor’s business which is to be transferred is carried on, immediately before the time of the transfer, by the transferor in a member State ... through a permanent establishment,
(b) at least one transferee is resident in a member State ...,
(c) the transferor company continues to carry on a business after the transfer,
(d) the conditions in subsection (1)(b), (d), (e) and (f) are satisfied, and
(e) either of the following conditions is satisfied.
(1B) Condition 1 is that the transfer is made in exchange for the issue of shares in or debentures of each transferee company to the persons holding shares in or debentures of the transferor.
(1C) Condition 2 is that the transfer is not made in exchange for the issue of shares in or debentures of each transferee by reason only, and to the extent only, that a transferee is prevented from complying with Condition 1 by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or by a corresponding provision of the law of a member State preventing the issue of shares or debentures to itself.
(2) In a case where this section applies, this Act shall have effect in accordance with subsection (3) below.
(3) The allowable losses accruing to the transferor on the transfer shall be set off against the chargeable gains so accruing and the transfer shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses.
(4) No claim may be made under this section as regards a transfer in relation to which a claim is made under section 140.
(5) In a case where this section applies, section 122 of TIOPA 2010 (tax treated as chargeable in respect of gains on transfer of non-UK business) shall also apply.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Section 140C shall not apply unless the transfer of the business or part is effected for bona fide commercial reasons and does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of liability to income tax, corporation tax or capital gains tax.
(2) Subsection (1) above shall not apply where, before the transfer, the Board have on the application of the transferor notified that company that the Board are satisfied that the transfer will be effected for bona fide commercial reasons and will not form part of any such scheme or arrangements as are mentioned in that subsection.
(3) Subsections (2) to (5) of section 138 shall have effect in relation to subsection (2) above as they have effect in relation to subsection (1) of that section.
(1) This section applies where—
(a) a transfer of assets to which section 140A(1A) or 140C(1A) applies has taken place,
(b) the transferor and the transferee (or each of the transferees) are each resident in a relevant state,
(c) they are not all resident in the same relevant state, and
(e) the transfer does not constitute or form part of a scheme of reconstruction within the meaning of section 136.
(2) Where this section applies, the transfer shall be treated for the purposes of section 136 as if it were a scheme of reconstruction.
(3) Where section 136 applies by virtue of subsection (2) above section 136(6) (and section 137) shall not apply.
(1) This section applies on a merger which satisfies the conditions specified in subsection (2), where—
(a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea),
(b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014 or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/2003 on the Statute for a European Cooperative Society (SCE),
(c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or
(d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures.
(2) The conditions mentioned in subsection (1) are that —
(a) each of the merging companies is resident in a relevant state,
(b) the merging companies are not all resident in the same relevant state,
(c) section 139 does not apply to any qualifying transferred assets,
(d) in the case of a merger to which subsection (1)(a), (b) or (c) applies, either─
(i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or
(ii) sub-paragraph (i) is not satisfied by reason only, and to the extent only, that the transferee is prevented from complying with sub-paragraph (i) by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of a member State preventing the issue of shares or debentures to itself, and
(e) in the case of a merger to which subsection (1)(c) or (d) applies, in the course of the merger each transferor ceases to exist without being in liquidation (within the meaning given by section 247 of the Insolvency Act 1986).
(3) Where this section applies, qualifying transferred assets shall be treated for the purposes of corporation tax on chargeable gains as if acquired by the transferee for a consideration resulting in neither gain nor loss for the transferor.
(4) For the purposes of subsections (2) and (3) an asset is a qualifying transferred asset if—
(a) it is transferred to the transferee as part of the process of the merger, and
(b) subsections (5) and (6) are satisfied in respect of it.
(5) This subsection is satisfied in respect of a transferred asset if—
(a) the transferor is resident in the United Kingdom at the time of the transfer, or
(b) any gain that would have accrued to the transferor, had it disposed of the asset immediately before the time of the transfer, would have been a chargeable gain forming part of the transferor’s chargeable profits in accordance with section 2B(3).
(6) This subsection is satisfied in respect of a transferred asset if—
(a) the transferee is resident in the United Kingdom at the time of the transfer, or
(b) any gain that would accrue to the transferee were it to dispose of the asset immediately after the transfer would be a chargeable gain forming part of the transferee’s chargeable profits in accordance with section 2B(3).
(7) If subsection (2)(d)(ii) applies in relation to a transfer of assets and liabilities on a merger (in whole or in part), sections 24 and 122 do not apply.
(8) This section does not apply in relation to a merger if—
(a) it is not effected for bona fide commercial reasons, or
(b) it forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax,
and section 138 (clearance in advance) shall apply to this subsection as it applies to section 137 (with any necessary modifications).
(9) In this section—
(a) “cooperative society” means a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014, a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 or a similar society established in accordance with the law of a member State ...,
(b) “transferor” means—
(i) in relation to a merger to which subsection (1)(a) applies, each company merging to form the SE,
(ii) in relation to a merger to which subsection (1)(b) applies, each cooperative society merging to form the SCE, and
(iii) in relation to a merger to which subsection (1)(c) or (d) applies, each company transferring all of its assets and liabilities,
(c) “transferee” means—
(i) in relation to a merger to which subsection (1)(a) applies, the SE,
(ii) in relation to a merger to which subsection (1)(b) applies, the SCE, and
(iii) in relation to a merger to which subsection (1)(c) or (d) applies, the company to which assets and liabilities are transferred, and
(d) references in subsections (1)(c) and (2) to (7) to a company include references to a cooperative society.
(1) This section applies on a merger which satisfies the conditions specified in subsection (2), where—
(a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea),
(b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014 or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/2003 on the Statute for a European Cooperative Society (SCE),
(c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or
(d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures.
(2) The conditions mentioned in subsection (1) are that—
(a) each merging company is resident in a relevant state,
(b) the merging companies are not all resident in the same relevant state,
(c) in the course of the merger a company resident in the United Kingdom (“company A”) transfers to a company resident in a member State (“company B”) all assets and liabilities relating to a business which company A carried on in a member State ... through a permanent establishment,
(d) the aggregate of the chargeable gains accruing to company A on the transfer exceeds the aggregate of any allowable losses so accruing, ...
(e) in the case of a merger to which subsection (1)(a), (b) or (c) applies, either─
(i) the transfer of assets and liabilities is made in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or
(ii) sub-paragraph (i) is not satisfied by reason only, and to the extent only, that the transferee is prevented from complying with sub-paragraph (i) by section 658 of the Companies Act 2006 (rule against limited company acquiring own shares) or a corresponding provision of the law of a member State preventing the issue of shares or debentures to itself and
(f) in the case of a merger to which subsection (1)(c) or (d) applies, in the course of the merger each transferor ceases to exist without being in liquidation (within the meaning given by section 247 of the Insolvency Act 1986 (c.55)).
(3) Where this section applies, for the purposes of this Act—
(a) the allowable losses accruing to company A on the transfer shall be set off against the chargeable gains so accruing, and
(b) the transfer shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses.
(4) Where this section applies, section 122 of TIOPA 2010 (tax treated as chargeable in respect of gains on transfer of non-UK business) shall also apply.
(5) Subsections (8) and (9) of section 140E apply for the purposes of this section as they apply for the purposes of that section.
(1) This section applies on a merger which satisfies the conditions specified in subsection (2), where—
(a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea),
(b) an SCE is formed by the merger of two or more cooperative societies, at least one of which is a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014 or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, in accordance with Articles 2(1) and 19 of Council Regulation (EC) 1435/2003 on the Statute for a European Cooperative Society (SCE),
(c) the merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures, or
(d) the merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures.
(2) The conditions mentioned in subsection (1) are that—
(a) each of the merging companies is resident in a relevant state,
(b) the merging companies are not all resident in the same relevant state, and
(c) the merger does not constitute or form part of a scheme of reconstruction within the meaning of section 136.
(3) Where this section applies, the merger shall be treated for the purposes of section 136 as if it were a scheme of reconstruction.
(4) Where section 136 applies by virtue of subsection (3) above section 136(6) (and section 137) shall not apply.
(5) Subsections (8) and (9) of section 140E apply for the purposes of this section as they apply for the purposes of that section.
140GA Disapplication of sections 24 and 122 where subsidiary merges with its parent
Sections 24 and 122 do not apply if—
(a) a merger is effected by the transfer by a company (“the transferor company”) of all of its assets and liabilities to a single company that holds the whole of the ordinary share capital in the transferor company,
(b) each merging company is resident in a relevant state,
(c) the merging companies are not all resident in the same relevant state,
(d) section 139 does not apply in relation to the transfer, and
(e) in the course of the merger the transferor company ceases to exist without being in liquidation (within the meaning given by section 247 of the Insolvency Act 1986 (c. 55).
(1) This section applies if—
(a) a company (“company B”) issues shares or debentures to a person in exchange for shares in or debentures of another company (“company A”),
(b) the exchange falls within one of the cases specified in section 135(2), and
(c) either company B or company A or both is a transparent entity.
(2) Where this section applies—
(a) “company” in section 135 shall be treated as meaning an entity listed in Part A of Annex I to the Mergers Directive, and
(b) section 135(3) does not apply.
(3) If, as a result of an exchange in relation to which this section applies, a gain accruing to a person holding shares in or debentures of company A on the exchange would, but for the Mergers Directive, have been chargeable to tax under the law of a member State ..., Part 2 of TIOPA 2010 (double taxation relief), including any double taxation relief arrangements, shall apply as if that tax, calculated in accordance with subsection (4), had been chargeable.
(4) Tax is calculated in accordance with this subsection if—
(a) so far as permitted under the law of the relevant member State, losses arising on the exchange are set against gains arising on the exchange, and
(b) any relief available to company A under that law has been claimed.
(1) This section applies in relation to a transfer of a business, or part of a business, where—
(a) the transfer is of a kind mentioned in section 140A(1) or (1A) (or which would be of such a kind if the business, or the part of the business, transferred were carried on by the transferor in the United Kingdom and the condition mentioned in section 140A(1)(e) were satisfied in relation to the transferee, or each of the transferees), and
(b) either the transferor or the transferee, or one of the transferees, is a transparent entity.
(2) Where this section applies—
(a) if the transferor is a transparent entity, sections 140A and 140DA do not apply in relation to the transfer;
(b) if a transferee is a transparent entity, section 140DA does not apply in relation to the transfer to it.
(3) If, as a result of a transfer in relation to which this section applies, a transfer gain would, but for the Mergers Directive, have been chargeable to tax under the law of a member State ..., Part 2 of TIOPA 2010 (double taxation relief), including any double taxation relief arrangements, shall apply as if that tax, calculated in accordance with subsection (5), had been chargeable.
(4) In subsection (3) “transfer gain” means a gain accruing to a transparent entity (or which would be treated as accruing to that entity were it not transparent) by reason of the transfer of assets by the transparent entity to the transferee.
(5) Tax is calculated in accordance with this subsection if—
(a) so far as permitted under the law of the relevant member State, losses arising on the transfer are set against gains arising on the transfer, and
(b) any relief available under that law has been claimed.
(1) This section applies in relation to a merger if—
(a) the merger is of a kind mentioned in section 140E(1),
(b) the conditions in section 140E(2) are satisfied in relation to the merger, and
(c) one or more of the merging companies is a transparent entity.
(2) Where this section applies—
(a) if the assets and liabilities of a transparent entity are transferred to another company by reason of the merger, sections 140E and 140G shall not apply;
(b) if the assets and liabilities of one or more other companies are transferred to a transparent entity by reason of the merger section 140G shall not apply.
(3) If, as a result of a merger in relation to which this section applies, a merger gain would, but for the Mergers Directive, have been chargeable to tax under the law of a member State ..., Part 2 of TIOPA 2010 (double taxation relief), including any double taxation relief arrangements shall apply as if that tax, calculated in accordance with subsection (5), had been chargeable.
(4) In subsection (3) “merger gain” means a gain accruing to a transparent entity (or which would be treated as accruing to that entity were it not transparent) by reason of the transfer of assets by the transparent entity to another company on the merger.
(5) Tax is calculated in accordance with this subsection if—
(a) so far as permitted under the law of the relevant member State, losses arising on the merger are set against gains arising on the merger, and
(b) any relief available under that law has been claimed.
140K Transparent entities: taxation after merger, &c
(1) This section applies if—
(a) a transparent entity (“company A”) is a transferee for the purposes of section 140A(1A) or 140E,
(b) a person (“X”) with an interest in company A was or is also a shareholder or debenture holder of a company (“company B”),
(c) X became entitled to an interest, or an increased interest, in company A in exchange for a disposal of shares in, or debentures of, company B on a merger to which section 140E applied or on a transfer to which section 140A(1A) applied,
(d) a chargeable gain accrued to X on the disposal of shares in or debentures of company B,
(e) in calculating the gain on the shares or debentures account was taken of the value of an asset of company B, and
(f) X makes a disposal of his interest in the asset.
(2) In computing the gain accruing to X on a disposal to which subsection (1)(f) applies, the sum allowable as a deduction in accordance with section 38(1)(a) in relation to the interest, or the proportion of the interest, which X acquired on the merger or transfer shall be the value taken into account in computing the gain on the disposal of his shares in, or debentures of, company B.
(3) In this section a reference to an interest in company A includes—
(a) an interest in the assets of company A,
(b) shares in company A, and
(c) debentures of company A.
(1) In sections 140A to 140K and this section, unless the contrary intention appears—
(a) “the Mergers Directive” means Council Directive 2009/133/EC,
(b) “company” means an entity listed as a company in Part A of Annex I to the Mergers Directive,
(ba) “relevant state” means the United Kingdom or a member State, and
(c) “transparent entity” means an entity which is resident in a member State ... and is listed as a company in Part A of Annex I to the Mergers Directive, but—
(i) does not have an ordinary share capital (within the meaning given by section 1119 of CTA 2010), and
(ii) if it were resident in the United Kingdom, would not be capable of being a company within the meaning given by the Companies Act 2006.
(2) For the purposes of those sections and subsection (1) above, a company is resident in a relevant state if—
(a) it is within a charge to tax under the law of the relevant state as being resident for that purpose, and
(b) it is not regarded, for the purposes of any double taxation relief arrangements to which the relevant state is a party, as resident in a territory not within a relevant state.
(1) This section applies where any share capital to which section 410(2), (3) or (4) of ITTOIA 2005 applies in respect of shares in the company held by any person.
(2) The case shall not constitute a reorganisation of the company’s share capital for the purposes of sections 126 to 128.
(3) The person who acquires the share capital by means of its issue shall (notwithstanding section 17(1)) be treated for the purposes of section 38(1)(a) as having acquired that asset for a consideration equal to the cash equivalent of the share capital in accordance with section 412 of ITTOIA 2005.
(1) This section applies if share capital issued in lieu of a cash dividend by—
(a) a company UK REIT, or
(b) the principal company of a group UK REIT,
is attributed as mentioned in section 550(2)(a), (c) or (d) of CTA 2010 (attribution of distributions).
(2) The case shall not constitute a reorganisation of the company's share capital for the purposes of sections 126 to 128.
(3) The person who acquires the share capital by means of its issue shall (notwithstanding section 17(1)) be treated for the purposes of section 38(1)(a) as having acquired that asset for a consideration equal to the cash equivalent of the share capital.
(4) Section 414A(2) to (4) of ITTOIA 2005 (meaning of “share capital issued in lieu of a cash dividend”) applies for the purposes of this section as it applies for the purposes of Chapter 5 of Part 4 of that Act.
(5) Section 412(1), (2), (4) and (5) of that Act (meaning of “cash equivalent of share capital”) applies for the purposes of this section as it applies in relation to share capital issued as mentioned in section 410(1)(a) of that Act.
(6) In this section “company UK REIT” and “principal company of a group UK REIT” are to be read in accordance with Part 12 of CTA 2010 (Real Estate Investment Trusts).
143 Commodity and financial futures and qualifying options.
(1) If, apart from section 981 of CTA 2009 and section 779 of ITTOIA 2005, gains arising to any person in the course of dealing in commodity or financial futures or in qualifying options would constitute, for the purposes of the Tax Acts, profits or gains chargeable to tax—
(a) under Chapter 8 of Part 10 of CTA 2009, or
(b) under Chapter 8 of Part 5 of ITTOIA 2005,
then his outstanding obligations under any futures contract entered into in the course of that dealing and any qualifying option granted or acquired in the course of that dealing shall be regarded as assets to the disposal of which this Act applies.
(2) In subsection (1) above—
(a) “commodity or financial futures” means commodity futures or financial futures which are for the time being dealt in on a recognised futures exchange; and
(b) “qualifying option” means a traded option or financial option as defined in section 144(8).
(3) Notwithstanding the provisions of subsection (2)(a) above, where, otherwise than in the course of dealing on a recognised futures exchange—
(a) an authorised person ... enters into a commodity or financial futures contract with another person, or
(b) the outstanding obligations under a commodity or financial futures contract to which an authorised person ... is a party are brought to an end by a further contract between the parties to the futures contract,
then, except in so far as any gain or loss arising to any person from that transaction arises in the course of a trade, that gain or loss shall be regarded for the purposes of subsection (1) above as arising to him in the course of dealing in commodity or financial futures.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) For the purposes of this Act, where, in the course of dealing in commodity or financial futures, a person who has entered into a futures contract closes out that contract by entering into another futures contract with obligations which are reciprocal to those of the first-mentioned contract, that transaction shall constitute the disposal of an asset (namely, his outstanding obligations under the first-mentioned contract) and, accordingly—
(a) any money or money’s worth received by him on that transaction shall constitute consideration for the disposal; and
(b) any money or money’s worth paid or given by him on that transaction shall be treated as incidental costs to him of making the disposal.
(6) In any case where, in the course of dealing in commodity or financial futures, a person has entered into a futures contract and—
(a) he has not closed out the contract (as mentioned in subsection (5) above), and
(b) he becomes entitled to receive or liable to make a payment, whether under the contract or otherwise, in full or partial settlement of any obligations under the contract,
then, for the purposes of this Act, he shall be treated as having disposed of an asset (namely, that entitlement or liability) and the payment received or made by him shall be treated as consideration for the disposal or, as the case may be, as incidental costs to him of making the disposal.
(7) Section 46 shall not apply to obligations under—
(a) a commodity or financial futures contract which is entered into by a person in the course of dealing in such futures on a recognised futures exchange; or
(b) a commodity or financial futures contract to which an authorised person ... is a party.
(8) In this section “authorised person” means a person who—
(a) falls within section 31(1)(a), (b) or (c) of the Financial Services and Markets Act 2000, and
(b) has permission under that Act to carry on one or more of the activities specified in Article 14 and, in so far as it applies to that Article, Article 64 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.
(1) Without prejudice to section 21, the grant of an option, and in particular—
(a) the grant of an option in a case where the grantor binds himself to sell what he does not own, and because the option is abandoned, never has occasion to own, and
(b) the grant of an option in a case where the grantor binds himself to buy what, because the option is abandoned, he does not acquire,
is the disposal of an asset (namely of the option), but subject to the following provisions of this section as to treating the grant of an option as part of a larger transaction.
(2) If an option is exercised, the grant of the option and the transaction entered into by the grantor in fulfilment of his obligations under the option shall be treated as a single transaction and accordingly—
(a) if the option binds the grantor to sell, the consideration for the option is part of the consideration for the sale, and
(b) if the option binds the grantor to buy, the consideration for the option shall be deducted from the cost of acquisition incurred by the grantor in buying in pursuance of his obligations under the option.
(3) The exercise of an option by the person for the time being entitled to exercise it shall not constitute the disposal of an asset by that person, but, if an option is exercised then the acquisition of the option (whether directly from the grantor or not) and the transaction entered into by the person exercising the option in exercise of his rights under the option shall be treated as a single transaction and accordingly—
(a) if the option binds the grantor to sell, the cost of acquiring the option shall be part of the cost of acquiring what is sold, and
(b) if the option binds the grantor to buy, the cost of the option shall be treated as a cost incidental to the disposal of what is bought by the grantor of the option.
(4) The abandonment of—
(a) a quoted option to subscribe for shares in a company, or
(b) a traded option or financial option, or
(c) an option to acquire assets exercisable by a person intending to use them, if acquired, for the purpose of a trade carried on by him,
shall constitute the disposal of an asset (namely of the option); but the abandonment of any other option by the person for the time being entitled to exercise it shall not constitute the disposal of an asset by that person.
(5) This section shall apply in relation to an option binding the grantor both to sell and to buy as if it were 2 separate options with half the consideration attributed to each.
(6) In this section references to an option include references to an option binding the grantor to grant a lease for a premium, or enter into any other transaction which is not a sale, and references to buying and selling in pursuance of an option shall be construed accordingly.
(7) This section shall apply in relation to a forfeited deposit of purchase money or other consideration money for a prospective purchase or other transaction which is abandoned as it applies in relation to the consideration for an option which binds the grantor to sell and which is not exercised.
(8) In subsection (4) above and sections 146 and 147—
(a) “quoted option” means an option which, at the time of the abandonment or other disposal, is listed on a recognised stock exchange;
(b) “traded option” means an option which, at the time of the abandonment or other disposal, is listed on a recognised stock exchange or a recognised futures exchange; and
(c) “financial option” means an option which is not a traded option, as defined in paragraph (b) above, but which, subject to subsection (9) below—
(i) relates to currency, shares, securities or an interest rate and is granted (otherwise than as agent) by a member of a recognised stock exchange, by an authorised person within the meaning given by section 143(8); or
(ii) relates to shares or securities which are dealt in on a recognised stock exchange and is granted by a member of such an exchange, acting as agent; or
(iii) relates to currency, shares, securities or an interest rate and is granted to such an authorised person ... as is referred to in sub-paragraph (i) above and concurrently and in association with an option falling within that sub-paragraph which is granted by that authorised person ... to the grantor of the first-mentioned option; or
(iv) relates to shares or securities which are dealt in on a recognised stock exchange and is granted to a member of such an exchange, including such a member acting as agent.
(9) If the Treasury by order so provide, an option of a description specified in the order shall be taken to be within the definition of “financial option" in subsection (8)(c) above.
144ZA Application of market value rule in case of exercise of option
(1) Subject to section 144ZB, This section applies where—
(a) an option is exercised, so that by virtue of section 144(2) or (3) the grant or acquisition of the option and the transaction resulting from its exercise are treated as a single transaction, and
(b) section 17(1) (“the market value rule”) applies, or would apply but for this section, in relation to—
(i) the grant of the option,
(ii) the acquisition of the option (whether directly from the grantor or not) by the person exercising it, or
(iii) the transaction resulting from its exercise.
(2) If the option binds the grantor to sell—
(a) the market value rule does not apply for determining the consideration for the sale, except, where the rule applies for determining the consideration for the option, to that extent (in accordance with section 144(2)(a));
(b) the market value rule does not apply for determining the cost to the person exercising the option of acquiring what is sold, except, where the rule applies for determining the cost of acquiring the option, to that extent (in accordance with section 144(3)(a)).
(3) If the option binds the grantor to buy—
(a) the market value rule does not apply for determining the cost of acquisition incurred by the grantor, but without prejudice to its application (in accordance with section 144(2)(b)) where the rule applies for determining the consideration for the option;
(b) the market value rule does not apply for determining the consideration for the disposal of what is bought, but without prejudice to its application (in accordance with section 144(3)(b)) where the rule applies for determining the cost of the option.
(4) To the extent that, by virtue of this section, the market value rule does not apply for determining an amount or value, the amount or value to be taken into account is (subject to section 119A) the exercise price.
(4A) In subsection (4) above “exercise price”, in relation to an option, means the amount or value of the consideration which, under the terms of the option, is—
(a) receivable (if the option binds the grantor to buy), or
(b) payable (if the option binds the grantor to sell),
as a result of the exercise of the option (and does not include the amount or value of any consideration for the acquisition of the option (whether directly from the grantor or not)).
(5) Subsections (5) and (6) of section 144 shall apply for the purposes of this section and sections 144ZB to 144ZD as they apply for the purposes of that section.
(1) This section applies where—
(a) section 144ZA would apply but for this section in relation to an option, and
(b) the exercise of the option is non-commercial (see section 144ZC).
(2) But this section does not apply if—
(a) the option is a securities option within the meaning of Chapter 5 of Part 7 of ITEPA 2003 (see section 420(8) of that Act) to which that Chapter applies ... (see section 471 of that Act), or
(b) section 144ZD of this Act (value of underlying subject matter of option altered with a view to obtaining a tax advantage) applies in relation to the option.
(3) Where this section applies, neither section 144ZA nor the following provisions of section 144 shall apply in relation to the option—
(a) in subsection (2), the words from “and accordingly” to the end of that subsection, and
(b) in subsection (3), the words from “and accordingly” to the end of that subsection;
but subsection (4) or (5) below shall instead have effect (subject to subsection (6) below).
(4) If the option binds the grantor to buy—
(a) the cost of acquisition incurred by the grantor in buying in pursuance of his obligations under the option, and
(b) the consideration for the disposal of what is bought by the grantor,
shall be deemed for the purposes of tax in respect of chargeable gains to be the market value, at the time the option is exercised, of what is bought.
(5) If the option binds the grantor to sell—
(a) the consideration for the sale, and
(b) the cost to the person exercising the option of acquiring what is sold,
shall be deemed for the purposes of tax in respect of chargeable gains to be the market value, at the time the option is exercised, of what is sold.
(6) But if the whole or any part of the underlying subject matter of the option (see subsection (7)) is subject to any right or restriction which is enforceable by the person disposing of the underlying subject matter or a person connected with him—
(a) the market value of the underlying subject matter shall be determined for the purposes of subsection (4) or (5) above as if the right or restriction did not exist, and
(b) to the extent that subsection (6) or (7) of section 18 would apply apart from this paragraph, it shall be disregarded.
(7) In this section “underlying subject matter”, in relation to an option, means—
(a) if the option binds the grantor to sell, what falls to be sold on exercise of the option;
(b) if the option binds the grantor to buy, what falls to be bought on exercise of the option.
144ZC Section 144ZB: non-commercial exercise of option
(1) For the purposes of section 144ZB, the exercise of an option which binds the grantor to buy is non-commercial if the exercise price for the option (see subsection (3)) is less than the open market price (see subsection (4)) of what is bought.
(2) For the purposes of section 144ZB, the exercise of an option which binds the grantor to sell is non-commercial if the exercise price for the option is greater than the open market price of what is sold.
(3) In this section “exercise price”, in relation to an option, means the amount or value of the consideration which, under the terms of the option, is—
(a) receivable (if the option binds the grantor to buy), or
(b) payable (if the option binds the grantor to sell),
as a result of the exercise of the option (and does not include the amount or value of any consideration for the acquisition of the option (whether directly from the grantor or not)).
(4) In this section “open market price”, in relation to the underlying subject matter of an option (see section 144ZB(7)), means the price which the underlying subject matter might reasonably be expected to fetch on a sale in the open market at the time the option is exercised; and subsections (5) to (7) below apply for the purposes of this subsection.
(5) If the whole or any part of the underlying subject matter of the option is subject to any right or restriction which is enforceable by—
(a) the person disposing of the underlying subject matter, or
(b) a person connected with him,
the open market price of the underlying subject matter shall be determined as if the right or restriction did not exist.
(6) Section 272(2) (no reduction in estimated market value on account of assumption that whole of assets are placed on market at one time) shall apply in estimating the open market price of the underlying subject matter of an option as it applies in estimating the market value of any assets.
(7) Where the underlying subject matter of an option comprises or includes assets to which section 273 applies (unquoted shares and securities), subsection (3) of that section (assumption that relevant information is available) shall apply in determining the open market price of those assets as it applies for the purposes of a determination falling within subsection (1) of that section.
(8) This section is to be construed as one with section 144ZB.
144ZD Section 144ZB: alteration of value to obtain tax advantage
(1) This section applies in relation to an option if each of the following conditions is satisfied (as to the effect of this section applying, see section 144ZB(2)(b)).
(2) Condition 1 is that section 144ZB would, apart from subsection (2)(b) of that section, apply in relation to the option.
(3) Condition 2 is that, at the time the option is exercised, the open market price (see section 144ZC(4)) of the underlying subject matter of the option (see section 144ZB(7)) differs from the open market price of the underlying subject matter of the option at the time the option was granted.
(4) Condition 3 is that some or all of that change in the open market price of the underlying subject matter of the option results to any extent, directly or indirectly, from arrangements (see subsection (8)) (“the relevant arrangements”)—
(a) to which a relevant person is or has been a party, or
(b) which include one or more transactions to which a relevant person is or has been a party.
(5) In subsection (4) above “relevant person” means any of the following—
(a) the grantor of the option;
(b) any person who at any time holds the option;
(c) a person connected with one or more of the persons mentioned in paragraph (a) or (b) above.
(6) Condition 4 is that, if there were to be disregarded so much of that change in the open market price of the underlying subject matter of the option as results to any extent, directly or indirectly, from the relevant arrangements, the exercise of the option would not be non-commercial (see section 144ZC).
(7) Condition 5 is that (apart from this section) as a result, directly or indirectly, of the relevant arrangements—
(a) the grantor of the option, or
(b) the person exercising the option,
would obtain or might be expected to obtain an advantage (see subsection (9)) in relation to capital gains tax or corporation tax in respect of chargeable gains directly or indirectly in consequence of, or otherwise in connection with, the exercise of the option.
(8) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(9) In this section “advantage”, in relation to capital gains tax or corporation tax in respect of chargeable gains, means—
(a) relief or increased relief from, or repayment or increased repayment of, that tax, or the avoidance or reduction of a charge to that tax or an assessment to that tax or the avoidance of a possible assessment to that tax, or
(b) the deferral of any payment of that tax or the advancement of any repayment of that tax.
(10) This section is to be construed as one with sections 144ZB and 144ZC.
(1) In any case where—
(a) an option is exercised; and
(b) the nature of the option (or its exercise) is such that the grantor of the option is liable to make, and the person exercising it is entitled to receive, a payment in full settlement of all obligations under the option,
subsections (2) and (3) below shall apply in place of subsections (2) and (3) of section 144.
(2) As regards the grantor of the option—
(a) he shall be treated as having disposed of an asset (namely, his liability to make the payment) and the payment made by him shall be treated as incidental costs to him of making the disposal; and
(b) the grant of the option and the disposal shall be treated as a single transaction and the consideration for the option shall be treated as the consideration for the disposal.
(3) As regards the person exercising the option—
(a) he shall be treated as having disposed of an asset (namely, his entitlement to receive the payment) and the payment received by him shall be treated as the consideration for the disposal;
(b) the acquisition of the option (whether directly from the grantor or not) and the disposal shall be treated as a single transaction and the cost of acquiring the option shall be treated as expenditure allowable as a deduction under section 38(1)(a) from the consideration for the disposal; and
(c) for the purpose of computing the indexation allowance (if any) on the disposal, the cost of the option shall be treated (notwithstanding paragraph (b) above) as incurred when the option was acquired.
(4) In any case where subsections (2) and (3) above would apply as mentioned in subsection (1) above if the reference in that subsection to full settlement included a reference to partial settlement, those subsections and subsections (2) and (3) of section 144 shall both apply but with the following modifications—
(a) for any reference to the grant or acquisition of the option there shall be substituted a reference to the grant or acquisition of so much of the option as relates to the making and receipt of the payment or, as the case may be, the sale or purchase by the grantor; and
(b) for any reference to the consideration for, or the cost of or of acquiring, the option there shall be substituted a reference to the appropriate proportion of that consideration or cost.
(5) In this section “appropriate proportion” means such proportion as may be just and reasonable in all the circumstances.
(1) This section applies ... where, on a disposal to which section 53 applies, the relevant allowable expenditure includes both—
(a) the cost of acquiring an option binding the grantor to sell (“the option consideration”); and
(b) the cost of acquiring what was sold as a result of the exercise of the option (“the sale consideration”),
but does not apply in any case where section 114 applies.
(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) For the purpose of computing the indexation allowance (if any) on the disposal referred to in subsection (1) above—
(a) the option consideration and the sale consideration shall be regarded as separate items of expenditure; and
(b) subsection (4) of section 54 shall apply to neither of those items and, accordingly, they shall be regarded as incurred when the option was acquired and when the sale took place, respectively.
(3) This section has effect notwithstanding section 144, but expressions used in this section have the same meaning as in that section and subsection (5) of that section applies for the purpose of determining the cost of acquiring an option binding the grantor to sell.