Section FM 23 — Income Tax Act 2007: Arrangements for disposal of shares

FM 23 Arrangements for disposal of shares When this section applies (1) This section applies when— (a) 2 companies ( company A and company B ) are in the same consolidated group; and (b) the value of company A’s net assets have been reduced as a result of a dividend, distribution, payment, arrangement, or transaction between company A and company B at the time the dividend is paid or the distribution, payment, arrangement, or transaction is made; and (c) another company ( company C ) disposes of shares in company A for consideration that is less than the amount that would have been received in an arm’s length transaction had the reduction in the value of company A’s net assets not occurred; and (d) if the disposal were by way of sale, the consideration from the sale would be included in company C’s income, other than income taken into account under section FM 3 . Arm’s length transaction on disposal of shares (2) The disposal is treated as if it were a sale at arm’s length. Income (3) The amount that would have been received in an arm’s length transaction is income of company C under section CV 3 (Consolidated groups: arrangement for disposal of shares). Timing (4) The time at which the consideration for the sale at arm’s length is determined is before the reduction in the value of company A’s net assets. Relationship with sections FM 8 and FM 11 (5) Subsection (2) does not apply to an amount of income taken into account under section FM 8 or FM 11 . Defined in this Act: amount , arrangement , company , consolidated group , dividend , income , pay , share , Compare: 2004 No 35 s FD 10(8)