Taxation of Chargeable Gains Act 1992 section 140E

Merger leaving assets within UK tax charge

Section 140E provides no gain/no loss treatment for qualifying assets transferred in certain cross-border mergers, including mergers forming a European Company (SE), a European Cooperative Society (SCE), or other mergers where companies transfer all their assets and liabilities to another company, provided the assets remain within the UK tax charge.

• Cross-border mergers involving companies resident in different relevant states can benefit from no gain/no loss treatment on qualifying transferred assets, provided the assets remain within the UK corporation tax net both before and after the merger.
• A qualifying transferred asset is one transferred as part of the merger where either the transferor or transferee is UK resident, or the asset would give rise to a UK chargeable gain immediately before or after the transfer.
• The relief does not apply where the merger is not carried out for genuine commercial reasons, or where it forms part of a tax avoidance scheme — advance clearance under section 138 is available.
• The section covers four types of merger: formation of an SE, formation of an SCE, absorption of one or more companies into a single existing company, and combination of two or more companies into a single new company — with transferor companies required to cease to exist without going into liquidation in the latter two cases.