Taxation of Chargeable Gains Act 1992 section 139

Reconstruction involving transfer of business

Section 139 provides for a no gain/no loss treatment when a company transfers its business (or part of it) to another company as part of a scheme of reconstruction, subject to various conditions and anti-avoidance rules.

• Where a scheme of reconstruction involves transferring a company's business to another company, and the transferor receives no consideration other than the assumption of liabilities, the transfer is treated as taking place on a no gain/no loss basis for corporation tax on chargeable gains purposes.
• Both companies must be either UK resident or hold the transferred assets as chargeable assets within the UK tax net; the relief does not apply to transfers of trading stock or transfers to unit trusts, investment trusts, or venture capital trusts.
• The reconstruction must be carried out for genuine commercial reasons and must not form part of a tax avoidance scheme — though advance clearance can be obtained from HMRC to confirm this condition is met.
• If the relief is denied under the anti-avoidance rule and the resulting tax goes unpaid, HMRC can recover the tax from the company that received the assets, or from any subsequent holder that acquired them through further no gain/no loss transfers.