Finance Act, 1996

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Amendment of section 135 (company ceasing to be a member of a group) of Corporation Tax Act, 1976.

51.—As respects a company ceasing to be a member of a group of companies on or after the 28th day of March, 1996, section 135 of the Corporation Tax Act, 1976 , is hereby amended—

(a) in subsection (1) by the insertion after “or in consequence of another member of the group being wound up or dissolved” of “where the winding up or dissolution of the member or the other member, as the case may be, is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax”, and

(b) by the substitution for subsection (2) of the following subsection:

“(2) Where two or more associated companies (hereafter in this subsection referred to as ‘the associated companies’) cease to be members of a group at the same time—

(a) subsection (1) shall not have effect as respects an acquisition by one from another of the associated companies, and

(b) where—

(i) a dividend has been paid or a distribution has been made by one of the associated companies to a company which is not one of the associated companies, and

(ii) the dividend so paid or the distribution so made, has been paid or made, as the case may be, wholly or partly out of profits which derive from the disposal of any asset by one to another of the associated companies,

the amount of the dividend paid or the amount or value of the distribution made, to the extent that it is paid or made, as the case may be, out of those profits, shall be deemed for the purposes of the Capital Gains Tax Act, 1975 , to be consideration (in addition to any other consideration) received by the member of the group or former member of the group in respect of a disposal, which disposal gave rise to or was caused by the associated companies ceasing to be members of the group:

Provided that paragraph (b) shall not apply to a distribution other than a dividend where a company ceases to be a member of a group of companies before the 23rd day of April, 1996.”.