Taxation of Chargeable Gains Act 1992 section 140GA

Disapplication of sections 24 and 122 where subsidiary merges with its parent

Section 140GA disapplies certain capital gains tax provisions that would otherwise treat a company's shares as disposed of or its assets as lost, where a subsidiary merges with its parent company in a cross-border context.

• Where a subsidiary transfers all its assets and liabilities to its parent company (which holds all the subsidiary's ordinary shares), the normal rules treating assets as disposed of on destruction or loss (section 24) and treating certain distributions as disposals (section 122) are switched off.
• The relief only applies where each merging company is resident in a relevant state but the merging companies are not all resident in the same relevant state, ensuring the merger has a genuine cross-border element.
• The general reconstruction relief under section 139 must not already apply to the transfer.
• The transferor company must cease to exist during the merger without going into formal liquidation as defined by the Insolvency Act 1986.