Income Tax Act 2007

Acquisitions for restructuring purposesU.K.

326Restructuring to which section 327 appliesU.K.

(1)Section 327 applies if—

(a)arrangements are made for a company (“the new company”) to acquire all the shares (“old shares”) in another company (“the old company”),

(b)the acquisition provided for by the arrangements falls within subsection (2), and

(c)the Commissioners for Her Majesty's Revenue and Customs have, before any exchange of shares takes place under the arrangements, given an approval notification.

(2)An acquisition of shares falls within this subsection if—

(a)the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,

(b)new shares are issued in consideration of old shares only at times when there are no issued shares in the new company other than subscriber shares and new shares previously issued in consideration of old shares,

(c)the consideration for new shares of each description consists wholly of old shares of the corresponding description, and

(d)new shares of each description are issued to the holders of old shares of the corresponding description in respect of, and in proportion to, their holdings.

(3)For the purposes of subsection (1)(c) an approval notification is one which, on the application of either the old company or the new company, is given to the applicant company and states that the Commissioners for Her Majesty's Revenue and Customs are satisfied that the exchange of shares under the arrangements—

(a)will be effected for genuine commercial reasons, and

(b)will not form part of any such scheme or arrangements as are mentioned in section 137(1) of TCGA 1992 (schemes with avoidance purposes).

(4)Nothing in section 327 treats any of the requirements of Chapter 4 as being met in relation to any new shares unless the matching old shares were first issued to the company holding them and have been held by that company from the time when they were issued until they are acquired by the new company.

(5)If, at any time after the arrangements first came into existence and before the new company acquired all the old shares, the arrangements—

(a)cease to be arrangements for the acquisition of all the old shares by the new company, or

(b)cease to be arrangements for an acquisition falling within subsection (2),

section 327 does not treat any requirement of Chapter 4 as being met, and subsection (8) of that section does not apply, in the case of any new shares at any time after the arrangements have so ceased.

327Certain requirements of Chapter 4 to be treated as metU.K.

(1)If this section applies, subsections (2) to (8) have effect to determine the extent to which, and the times for which, the requirements of the following provisions of Chapter 4 are met in relation to the new shares—

• section 287 (the maximum qualifying investment requirement),

• section 289 (the proportion of eligible shares requirement),

• section 290 (the trading requirement),

• section 291 (the carrying on of a qualifying activity requirement),

• section 293 (the use of the money raised requirement),

• section 294 (the relevant company to carry on the relevant qualifying activity requirement),

• section 296 (the control and independence requirement), and

• section 297 (the gross assets requirement)[F1, and

• section 297A (the number of employees requirement).]

(2)If the requirements of sections 290 and 291 were met in relation to the old company and any old shares immediately before the beginning of the period for giving effect to the arrangements, then (so far as it would not otherwise be the case) those requirements are treated as being met in relation to the new company and the matching new shares at all times which—

(a)fall in that period, and

(b)do not fall after a time when (apart from the arrangements) those requirements would have ceased by virtue of—

(i)section 291(4) or (5), or

(ii)any cessation of a trade by any company,

to be met in relation to the old company and the matching old shares.

(3)For the purposes of section 291, the period of two years mentioned in subsection (4) of that section is treated, in the case of any new shares, as expiring at the same time as it would have expired (or by virtue of this subsection would have been treated as expiring) in the case of the matching old shares.

(4)Subject to subsection (5), if—

(a)there is an exchange under the arrangements of any new shares for any old shares, and

(b)those old shares are shares in relation to which the requirements of sections 293, 294[F2, 297 and 297A] were (or were treated as being) met to any extent immediately before the exchange,

those requirements are to be treated, at all times after that time, as met to the same extent in relation to the matching new shares.

(5)If there is a time following any exchange under the arrangements of any new shares for any old shares when (apart from the arrangements) the requirement of section 293 would have ceased under—

(a)subsection (1) of that section, or

(b)this subsection,

to be met in relation to those old shares, that requirement ceases at that time to be met in relation to the matching new shares.

(6)For the purposes of section 287, any new shares acquired under the arrangements are to be treated as representing an investment which—

(a)raised the same amount of money as was raised (or, by virtue of this subsection, is treated as having been raised) by the issue of the matching old shares, and

(b)raised that amount by an issue of shares in the new company made at the time when the issue of the matching old shares took place (or, as the case may be, is treated as having taken place).

(7)In determining whether the requirements of section 296 are met in relation to the old company or the new company at a time in the period for giving effect to the arrangements, ignore both—

(a)the arrangements themselves, and

(b)any exchange of new shares for old shares that has already taken place under the arrangements.

(8)For the purposes of section 289, the value of the new shares, both—

(a)immediately after the time of their acquisition, and

(b)immediately after the time of any subsequent relevant event occurring by virtue of the arrangements,

is to be taken to be the same as the value, when last valued in accordance with that section, of the old shares for which they are exchanged.

328SupplementaryU.K.

(1)Subject to subsection (2), references in sections 326 and 327 and this section, except in the expression “subscriber shares”, to shares in a company include references to any securities of that company.

(2)For the purposes of subsection (1) a relevant security of the old company is not to be treated as a security of the old company if—

(a)the arrangements do not provide for the acquisition of the security by the new company, or

(b)such treatment prevents section 326(1)(b) from being met in connection with the arrangements.

(3)In subsection (2) “relevant security” means an instrument which is a security for the purposes of Chapter 4 merely because of section 285(2).

(4)References in section 327 to the period for giving effect to the arrangements are references to the period which—

(a)begins with the time when the arrangements first came into existence, and

(b)ends with the time when the new company completes its acquisition under the arrangements of all the old shares.

(5)For the purposes of sections 326 and 327 and this section—

(a)old shares and new shares are of a corresponding description if, were they shares in the same company, they would be of the same description, and

(b)old shares and new shares are matching shares in relation to each other if the old shares are the shares for which the new shares are exchanged under the arrangements.