Section DC 10 — Income Tax Act 2007: Sale of business: transferred employment income obligations

DC 10 Sale of business: transferred employment income obligations When this section applies (1) This section applies when— (a) a person (the seller ) sells a business, or a part of a business, to another person (the buyer ); and (b) an employee of the seller working in the business, or the part of the business, becomes an employee of the buyer under the sale arrangements; and (c) the seller and the buyer agree in writing, under the sale arrangements, that the buyer assumes the obligation to pay an amount of employment income to the employee. Deduction: parties not associated (2) If the seller and the buyer are not associated persons at the time of the sale,— (a) the seller is allowed a deduction, in the income year of the sale, for the provision made by the seller for any part of the amount that remains contingent on the employee continuing in employment or any similar factor; and (b) the seller is treated under section EA 4(4) (Deferred payment of employment income) as having paid the amount of the provision at the time of sale. Deduction: parties associated (3) If the seller and the buyer are associated persons at the time of the sale,— (a) the buyer is allowed a deduction for the provision made by the seller for the amount of employment income if the seller would have been allowed a deduction for the amount if the business, or the part of the business, had not been sold; and (b) subsection (2) does not apply, and section EA 4(5) will mean that the seller cannot get a deduction for the amount. Deduction: excess (4) The buyer is allowed a deduction for any part of the amount of employment income that the buyer pays that is more than the provision made by the seller for the amount. Link with subpart DA (5) The link between this section and subpart DA (General rules) is as follows: (a) subsection (2)(a) supplements the general permission; the general limitations still apply: (b) subsections (3)(a) and (4) override the capital limitation; the general permission must still be satisfied and the other general limitations still apply. Defined in this Act: amount , arrangement , associated person , business , capital limitation , deduction , employee , employment income , general limitation , general permission , income year , pay , supplement , time of the sale , Compare: 2004 No 35 s DC 9