Section 37 — Finance Act 2014: Changes in company ownership

Changes in company ownership 37 1 Part 14 of CTA 2010 (change in company ownership) is amended as follows.

2 In section 688 (meaning of “significant increase in the amount of a company's capital”), in subsection (2), for paragraph (b) and the “or” before it substitute , and b is at least 125% of amount A.

3 In section 723 (changes in indirect ownership), in subsection (1), after “section 724” insert “ or 724A ” .

4 After section 724 insert— Disregard of change in parent company 724A 1 Where a new company (“N”) acquires all the issued share capital of another company (“C”), the resulting ownership change is disregarded for the purposes of Chapters 2 to 6 if, immediately after that acquisition (“the acquisition”), N—

a possesses all of the voting power in C, b is beneficially entitled to 100% of any profits available for distribution to equity holders of C, c would be beneficially entitled to 100% of any assets of C available for distribution to its equity holders in the event of a winding up of C or in any other circumstances, and d meets the continuity requirements. 2 “ The resulting ownership change ” means the change in the ownership of C by reason of Condition A in section 719 being met in relation to the acquisition.

3 A company is “new” if, before the acquisition, it has neither—

a issued any shares other than subscriber shares, nor b begun to carry on any trade or business.

4 N meets the continuity requirements if, and only if—

a the consideration for the acquisition consists only of the issue of shares in N to the shareholders of C, b immediately after the acquisition, each person who immediately before the acquisition was a shareholder of C is a shareholder of N, c immediately after the acquisition, the shares in N are of the same classes as were the shares in C immediately before the acquisition, d immediately after the acquisition, the number of shares of any particular class in N bears to all the shares in N the same proportion, or as nearly as may be the same proportion, as the number of shares of that class in C bore to all the shares in C immediately before the acquisition, and e immediately after the acquisition, the proportion of shares of any particular class in N held by any particular shareholder is the same, or as nearly as may be the same, as the proportion of shares of that class in C held by that shareholder immediately before the acquisition.

5 For the purposes of this section, N is treated as acquiring all the issued share capital of C for consideration consisting only of the issue of shares in N to the shareholders of C if, as a result of a scheme of reconstruction involving the cancellation of all shares in C and the issue of shares in N—

a N holds all the issued share capital of C by reason of that share capital being issued to N by C, and b only shares in N are issued to the persons who were shareholders of C immediately before the shares in C were cancelled.

6 In a case within subsection (5), subsection (4) applies as if any reference to immediately before the acquisition were a reference to immediately before the shares in C were cancelled. 7 “ Scheme of reconstruction ” means a scheme carried out in pursuance of a compromise or arrangement—

a to which Part 26 of the Companies Act 2006 (arrangements and reconstructions) applies, or b under any corresponding provision of the law of a country or territory outside the United Kingdom.

8 Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsection (1)(b) and (c) as it applies for the purposes of section 151(4).

5 In section 726 (interpretation of Chapter), after “acquisition” insert “ and shareholder ” .

6 The amendments made by this section have effect in relation to any change of ownership which occurs on or after 1 April 2014.