Taxation of Chargeable Gains Act 1992 section 140F

Merger: assets outside UK tax charge

Section 140F deals with the capital gains tax treatment where, as part of a cross-border merger, a UK-resident company transfers assets and liabilities of a business it operated through a permanent establishment in another state, so that those assets move outside the UK tax charge.

• The section applies to cross-border mergers forming a European Company (SE), a European Cooperative Society (SCE), or mergers where all assets and liabilities are transferred to a single existing or new company, provided the merging companies are resident in different relevant states.
• A UK-resident company (company A) must transfer all assets and liabilities of a business it carried on through a permanent establishment in another member state to a company (company B) resident in a member state, and the total chargeable gains on the transfer must exceed the total allowable losses.
• The allowable losses are set against the chargeable gains, and the transfer is treated as giving rise to a single net chargeable gain — with notional double taxation relief available under section 122 of TIOPA 2010 against the tax due on that gain.
• The anti-avoidance provisions from section 140E(8) and (9) also apply, and for mergers involving a transfer to an existing or new company (other than forming an SE or SCE), each transferor company must cease to exist without going into liquidation.