Taxation of Chargeable Gains Act 1992 section 140I

Division of business or transfer of assets

Section 140I deals with the capital gains tax treatment of business transfers where one of the parties involved is a transparent entity, disapplying the normal merger relief rules and instead providing notional double taxation relief.

• The section applies to transfers of a business or part of a business that would otherwise fall within section 140A, where either the transferor or a transferee is a transparent entity (an entity whose gains are taxed on its members rather than on itself).
• Where the section applies, the normal no-gain/no-loss treatment under sections 140A and 140DA is switched off — meaning those reliefs do not apply to transfers involving transparent entities.
• If the transfer would have given rise to a taxable gain in another member state but for the EU Mergers Directive exempting it, double taxation relief under Part 2 of TIOPA 2010 is given as though the foreign tax had actually been charged.
• The notional foreign tax is calculated by first setting transfer losses against transfer gains (to the extent permitted by the relevant state's law) and assuming all available reliefs have been claimed.