How does section 778 of the Corporation Tax Act 2009 extend roll-over reinvestment relief?

Section 778 extends roll-over reinvestment relief for intangible fixed assets to cover situations where a company reinvests by purchasing shares in another company, acquiring a controlling interest so the target company joins the acquirer's group. The relief applies to intangible fixed assets held by the acquired company and any subsidiaries that also join the group.

What constitutes a controlling interest under CTA 2009 section 778?

A controlling interest is acquired when three conditions are satisfied: company A and company B are not in the same group before the transaction, company A purchases shares in company B, and as a result of that purchase company A and company B are in the same group immediately afterwards. This targets genuine acquisitions rather than internal reorganisations.

Who must make the joint claim for roll-over relief under section 778?

The claim for roll-over relief cannot be made by the acquiring company alone. It must be made jointly by the acquiring company and whichever company or companies actually hold the relevant underlying intangible fixed assets. This ensures all parties to the arrangement agree on the application of the relief.

Which intangible fixed assets qualify as underlying assets for section 778 relief?

The qualifying underlying assets are intangible fixed assets held by the acquired company or by any other company that was outside the acquirer's group before the acquisition but joined the group as a consequence of it. This includes assets held by subsidiaries of the acquired company that enter the group at the same time.

Corporation Tax Act 2009 section 778

Relief on reinvestment: acquisition of group company: introduction

Section 778 introduces the rules that extend roll-over reinvestment relief for intangible fixed assets to situations where a company reinvests by acquiring a controlling interest in another company that holds such assets.

Where company A acquires a controlling interest in company B by purchasing shares so that B joins A's group, roll-over relief under Chapter 7 can apply to intangible fixed assets held by B or by other companies that join A's group as a result of the acquisition.
A controlling interest is acquired when A and B were not previously in the same group, A buys shares in B, and as a result A and B are in the same group immediately after the purchase.
The companies whose intangible fixed assets qualify as "underlying assets" must not have been in A's group before the acquisition but must be in A's group immediately afterwards.
Any claim for roll-over relief must be made jointly by company A and the company or companies that hold the relevant underlying intangible fixed assets.

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