Taxation (International and Other Provisions) Act 2010 section 118

Introduction to section 119

Section 118 sets out the qualifying conditions that must be met before section 119 can apply to the transfer of loan relationships, derivative contracts, or intangible fixed assets in the context of cross-border mergers involving UK and EU member state companies.

• The section covers four types of merger: formation of a European Company (SE), formation of a European Co-operative Society (SCE), transfer of all assets and liabilities to an existing company, and transfer of all assets and liabilities to a new company in exchange for shares or debentures.
• Up to seven conditions (A to G) must be satisfied depending on the type of merger, including that merging companies are resident in the UK or an EU member state, are not all resident in the same state, and that a UK-resident company transfers all assets and liabilities of a business it carried on through a permanent establishment in a member state.
• The transferred assets must include at least one of: a loan relationship asset or liability, rights and liabilities under a derivative contract, or intangible fixed assets that are chargeable intangible assets where proceeds exceed the cost recognised for tax purposes.
• Additional conditions may require that the transfer is made in exchange for shares or debentures issued to the transferor's shareholders or debenture holders, and that each transferor ceases to exist without going into liquidation.