Finance Act 1986

Reconstructions and acquistionsU.K.

F173. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

74 Reconstructions etc: repeals.U.K.

(1)The following provisions shall cease to have effect—

(a)section 55 of the M1Finance Act 1927 and section 4 of the M2Finance Act (Northern Ireland) 1928 (reconstructions and amalgamations);

(b)paragraph 12(1) and (1A) of Schedule 18 to the M3Finance Act 1980 (demergers);

(c)sections 78, 79 and 80 of the Finance Act 1985 (takeovers and winding-up).

(2)In paragraph 12(3) of Schedule 18 to the Finance Act 1980 for the words “sub-paragraph (2) above” there shall be substituted the words “this paragraph”.

(3)This section applies to any instrument executed in pursuance of a contract made on or after the day on which the rule of The Stock Exchange that prohibits a person from carrying on business as both a broker and a jobber is abolished.

75 Acquisitions: reliefs.U.K.

(1)This section applies where a company (the acquiring company) acquires the whole or part of an undertaking of another company (the target company) in pursuance of a scheme for the reconstruction of the target company.

(2)If the first and second conditions (as defined below) are fulfilled, stamp duty under [F2Part I of Schedule 13 to the Finance Act 1999 (conveyance or transfer on sale)]shall not be chargeable on an instrument executed for the purposes of or in connection with the transfer of the undertaking or part.

(3)An instrument on which stamp duty is not chargeable by virtue only of subsection (2) above shall not be taken to be duly stamped unless it is stamped with the duty to which it would be liable but for that subsection or it has, in accordance with section 12 of the Stamp Act 1891, been stamped with a particular stamp denoting that it is not chargeable with any duty.

(4)The first condition is F3... that the consideration for the acquisition—

(a)consists of or includes the issue of [F4non-redeemable] shares in the acquiring company to all the shareholders of the target company;

(b)includes nothing else (if anything) but the assumption or discharge by the acquiring company of liabilities of the target company.

[F5In paragraph (a) above, “non-redeemable shares” means shares which are not redeemable shares.]

(5)The second condition is that—

(a)the acquisition is effected for bona fide commercial reasons and does not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, is avoidance of liability to stamp duty, income tax, corporation tax or capital gains tax,

(b)after the acquisition has been made, each shareholder of each of the companies is a shareholder of the other, and

(c)after the acquisition has been made, the proportion of shares of one of the companies held by any shareholder is the same [F6 , or as nearly as may be the same,] as the proportion of shares of the other company held by that shareholder.

[F7(5A)If immediately before the acquisition the target company or the acquiring company holds any of its own shares, the shares are to be treated for the purposes of subsections (4) and (5) as having been cancelled before the acquisition (and, accordingly, the company is to be treated as if it were not a shareholder of itself).]

(6)This section applies to any instrument which is executed after 24th March 1986 unless it is executed in pursuance of an unconditional contract made on or before 18th March 1986.

(7)This section shall be deemed to have come into force on 25th March 1986.

76 Acquisitions: further provisions about reliefs.U.K.

(1)This section applies where a company (the acquiring company) acquires the whole or part of an undertaking of another company (the target company).

(2)If [F8the first and second conditions (as defined below)] is fulfilled, and stamp duty under [F9Part I of Schedule 13 to the Finance Act 1999 (conveyance or transfer on sale)] is chargeable on an instrument executed for the purposes of or in connection with—

(a)the transfer of the undertaking or part, or

(b)the assignment to the acquiring company by a creditor of the target company of any relevant debts (secured or unsecured) owed by the target company,

the rate at which the duty is charged under that heading shall not exceed that mentioned in subsection (4) below.

(3)[F10The first condition] is F11... that the consideration for the acquisition—

(a)consists of or includes the issue of [F12non-redeemable shares (within the meaning of section 75(4)(a) above)] in the acquiring company to the target company or to all or any of its shareholders;

(b)includes nothing else (if anything) but cash not exceeding 10 per cent. of the nominal value of those shares, or the assumption or discharge by the acquiring company of liabilities of the target company, or both.

[F13(3A)The second condition applies only in relation to an instrument transferring land in the United Kingdom and is that the acquiring company is not associated with another company that is a party to arrangements with the target company relating to shares of the acquiring company issued in connection with the transfer of the undertaking or part.

F13(3B)Where an instrument transfers land in the United Kingdom together with other property, the provisions of this section apply as if there were two separate instruments, one relating to land in the United Kingdom and the other relating to other property.]

(4)The rate is the rate of [F140.5%] of the amount or value of the consideration for the sale to which the instrument gives effect.

(5)An instrument on which, by virtue only of [F15this section], the rate at which stamp duty is charged is not to exceed that mentioned in subsection (4) above shall not be taken to be duly stamped unless it is stamped with the duty to which it would be liable but for [F15this section] or it has, in accordance with section 12 of the Stamp Act 1891, been stamped with a particular stamp denoting that it is duly stamped.

(6)In subsection (2)(b) above “relevant debts” means—

(a)any debt in the case of which the assignor is a bank or trade creditor, and

(b)any other debt incurred not less than two years before the date on which the instrument is executed.

[F16(6A)For the purposes of subsection (3A) above—

(a)companies are associated if one has control of the other or both are controlled by the same person or persons, and

(b)“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

The references in paragraph (a) above to control shall be construed in accordance with [F17sections 450 and 451 of the Corporation Tax Act 2010].]

(7)This section applies to any instrument executed on or after the day on which the rule of The Stock Exchange that prohibits a person from carrying on business as both a broker and a jobber is abolished.

77Acquisition of target company's share capitalU.K.

(1)Stamp duty under [F18Part I of Schedule 13 to the Finance Act 1999 (conveyance or transfer on sale)] shall not be chargeable on an instrument transferring shares in one company (the target company) to another company (the acquiring company) if the conditions mentioned in subsection (3) below are fulfilled.

(2)An instrument on which stamp duty is not chargeable by virtue only of subsection (1) above shall not be taken to be duly stamped unless it is stamped with the duty to which it would be liable but for that subsection or it has, in accordance with section 12 of the Stamp Act 1891, been stamped with a particular stamp denoting that it is not chargeable with any duty.

(3)The conditions are that —

F19(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)the transfer forms part of an arrangement by which the acquiring company acquires the whole of the issued share capital of the target company,

(c)the acquisition is effected for bona fide commercial reasons and does not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, is avoidance of liability to stamp duty, stamp duty reserve tax, income tax, corporation tax or capital gains tax,

(d)the consideration for the acquisition consists only of the issue of shares in the acquiring company to the shareholders of the target company,

(e)after the acquisition has been made, each person who immediately before it was made was a shareholder of the target company is a shareholder of the acquiring company,

(f)after the acquisition has been made, the shares in the acquiring company are of the same classes as were the shares in the target company immediately before the acquisition was made,

(g)after the acquisition has been made, the number of shares of any particular class in the acquiring company bears to all the shares in that company the same proportion [F20, or as nearly as may be the same proportion,] as the number of shares of that class in the target company bore to all the shares in that company immediately before the acquisition was made, and

(h)after the acquisition has been made, the proportion of shares of any particular class in the acquiring company held by any particular shareholder is the same [F21, or as nearly as may be the same,] as the proportion of shares of that class in the target company held by him immediately before the acquisition was made.

[F22(3A)If immediately before the acquisition the target company or the acquiring company holds any of its own shares, the shares are to be treated for the purposes of subsection (3) as having been cancelled before the acquisition (and, accordingly, the company is to be treated as if it were not a shareholder of itself).]

(4)In this section references to shares and to share capital include references to stock.

(5)This section applies to any instrument executed on or after 1st August 1986.