Finance Act 2006

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Chapter 4

Corporation Tax

Implementation of Council Directive No. 2005/19/EC amending Directive 90/434/EEC concerning companies of different Member States, and certain other matters.

60.— The Principal Act is amended—

(a) in section 4 by inserting the following after the definition of “profits”:

“ ‘SE’ means a European public limited-liability company (Societas Europaea or SE) as provided for by Council Regulation (EC) No. 2157/2001 of 8 October 2001, on the Statute for a European Company (SE) ³ ;

‘SCE’ means a European Cooperative Society (SCE) as provided for by Council Regulation (EC) No. 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE) ⁴ ;”,

(b) by inserting the following after section 23A:

“Residence of SE or SCE.

23B.— (1) An SE or an SCE which has its registered office in the State shall, subject to section 23A, be treated for the purposes of the Tax Acts and the Capital Gains Tax Acts as resident in the State.

(2) (a) An SE which transfers its registered office out of the State in accordance with Article 8 of Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (SE), and

(b) an SCE which transfers its registered office out of the State in accordance with Article 7 of Council Regulation (EC) No. 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE),

shall not cease to be resident in the State by virtue only of that transfer.”,

(c) in section 616 by inserting the following after subsection (3):

“(3A) Where at any time the principal company of a group—

(a) (i) becomes an SE by reason of being the acquiring company in the formation of an SE by merger by acquisition (in accordance with Articles 2(1), 17(2)(a) and 29(1) of the SE Regulation (within the meaning of section 630)),

(ii) becomes a subsidiary of a holding SE (formed in accordance with Article 2(2) of that Regulation), or

(iii) is transformed into an SE (in accordance with Article 2(4) of that Regulation),

or

(b) becomes an SCE in the course of a merger in accordance with Article 2 of the SCE Regulation (within the meaning of section 630),

then the group of which it was the principal company before that time and any group of which the SE, or as the case may be the SCE, is a member on formation shall be regarded as the same, and the question of whether or not a company has ceased to be a member of a group shall be determined accordingly.”,

(d) by inserting the following after section 629:

“Company ceasing to be resident on formation of SE or SCE.

629A.— If at any time a company ceases to be resident in the State in the course of—

(a) the formation of an SE by merger, or

(b) the formation of an SCE,

then, whether or not the company continues to exist after the formation of the SE or (as the case may be) the SCE, the Tax Acts and the Capital Gains Tax Acts shall apply to any obligations of the company under this Act in relation to liabilities accruing and matters arising before that time—

(i) as if the company were still resident in the State, and

(ii) where the company has ceased to exist, as if the SE or (as the case may be) the SCE were the company.”,

(e) in Part 21—

(i) in section 630—

(I) in the definition of “bilateral agreement” by substituting “826(1)(a)” for “826”,

(II) in the definition of “the Directive”, by inserting “(as amended)” after “of different Member States”, and

(III) by inserting the following after the definition of “receiving company”:

“ ‘SE Regulation’ means Council Regulation (EC) No. 2157/2001 of 8 October 2001, on the Statute for a European Company (SE) ⁵ ;

‘SCE Regulation’ means Council Regulation (EC) No. 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE) ⁶ ;”,

(ii) by inserting the following after section 633:

“Formation of SE or SCE by merger — leaving assets in the State.

633A.— (1) For the purposes of this section an asset is a qualifying transferred asset if—

(a) the asset is transferred to an SE or an SCE as part of the process of the merger forming it,

(b) (i) the transferor in relation to the asset is resident in the State at the time of the transfer, or

(ii) any gain that would have accrued to the transferor in respect of the asset, had it disposed of the asset immediately before the time of the transfer, would have been a chargeable gain,

and

(c) (i) the transferee SE or SCE in relation to the asset is resident in the State on formation, or

(ii) any gain that would have accrued to the transferee SE or SCE in respect of the asset, if it disposed of the asset immediately after the transfer, would be a chargeable gain.

(2) For the purposes of this section and section 633B, a company is treated as resident for the purposes of tax in a Member State (other than the State) if—

(a) it is so treated by virtue of the law of the Member State, and

(b) it is not treated, for the purposes of double taxation relief arrangements to which the Member State is a party, as resident for the purposes of tax in a territory which is not a Member State, and for this purpose ‘tax’, in relation to a Member State other than the State, means any tax imposed in the Member State which corresponds to corporation tax in the State.

(3) This section applies where—

(a) (i) an SE is formed by the merger of 2 or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of the SE Regulation, or

(ii) an SCE is formed by a merger in accordance with Article 2 of the SCE Regulation,

(b) each merging company is resident for the purposes of tax in a Member State,

(c) the merging companies are not all resident for the purposes of tax in the same Member State, and

(d) section 615 does not apply to any qualifying transferred assets.

(4) Where this section applies, qualifying transferred assets shall be treated for the purpose of the Capital Gains Tax Acts and, in so far as they apply to chargeable gains, the Corporation Tax Acts as if acquired by the SE, or as the case may be the SCE, for a consideration resulting in neither gain or loss for the transferor.

(5) Where this section applies—

(a) the transfer of assets in the course of the merger shall be treated as not giving rise to any allowance or charge provided for by section 307 or 308,

(b) there shall be made to or on the SE or (as the case may be) the SCE in accordance with sections 307 and 308 all such allowances and charges as would, if the transferring company had continued to use the transferred assets for the purposes of its trade, have been made to or on the transferring company in respect of any assets transferred in the course of the merger, and the amount of any such allowance or charge shall be computed as if the SE or (as the case may be) the SCE had been carrying on the trade carried on by the transferring company since the transferring company began to do so and as if everything done to or by the transferring company had been done to or by the SE or (as the case may be) the SCE.

Formation of SE or SCE by merger — not leaving assets in the State.

633B.— (1) This section applies where—

(a) (i) an SE is formed by the merger of 2 or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of the SE Regulation, or

(ii) an SCE is formed by a merger in accordance with Article 2 of the SCE Regulation,

(b) each merging company is resident for the purposes of tax in a Member State,

(c) the merging companies are not all resident for the purposes of tax in the same Member State,

(d) in the course of the merger a company resident in the State transfers to a company resident in a Member State other than the State all assets and liabilities of a trade which the company resident in the State carried on in a Member State (other than the State) through a branch or agency, and

(e) the aggregate of the chargeable gains accruing to the company resident in the State on the transfer exceeds the aggregate of any allowable losses so accruing.

(2) Where this section applies, for the purposes of the Capital Gains Tax Acts and, in so far as they apply to chargeable gains the Corporation Tax Acts—

(a) the allowable losses accruing to the company resident in the State on the transfer shall be set off against the chargeable gains so accruing, and

(b) the transfer shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses.

(3) Where this section applies, section 634 shall also apply.

Treatment of securities on a merger.

633C.— (1) This section applies where—

(a) (i) an SE is formed by the merger of 2 or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of the SE Regulation, or

(ii) an SCE is formed by a merger in accordance with Article 2 of the SCE Regulation,

(b) each merging company is resident for the purposes of tax in a Member State,

(c) the merging companies are not all resident for the purposes of tax in the same Member State, and

(d) the merger does not constitute or form part of a scheme of reconstruction or amalgamation within the meaning of section 587.

(2) Where this section applies, the merger shall be treated for the purposes of section 587 as if it were a scheme of reconstruction.”,

(iii) in section 634 by adding the following after subsection (2):

“(3) (a) Where—

(i) a company which is not resident in the State transfers the whole of a trade carried on by it, or a part of such a trade, to another company and the consideration for the transfer consists solely of the issue to the transferring company of securities in the receiving company, and

(ii) for the purposes of computing the income or gains of any person (in this subsection referred to as the ‘relevant person’) who is chargeable to tax in the State, income or gains of the transferring company are treated as being income, or as the case may be chargeable gains, of the relevant person and as not being income or chargeable gains of the transferring company,

then, in computing any liability to tax of the relevant person in respect of the transfer, an appropriate part of tax specified in a relevant certificate given by the tax authorities of the Member State in which the trade was so carried on shall be treated for the purposes of Chapter 1 of Part 35 as tax—

(I) payable under the law of that Member State, and

(II) in respect of which credit may be allowed under a bilateral agreement.

(b) For the purposes of this subsection, the appropriate part of tax on income or gains specified in a certificate in relation to a relevant person shall be so much of that tax as bears to the amount of that tax the same proportion as the part of any income, or as the case may be gains, of the transferring company in respect of the transfer which is treated as income, or as the case may be gains, of the relevant person bears to the amount of that income, or as the case may be gains, of the transferring company.”,

(iv) in section 635—

(I) by substituting “sections 631, 632, 633, 633A, 633C and 634” for “sections 631 to 634”, and

(II) by substituting “as respects a transfer, disposal or the formation of an SE or an SCE by merger unless it is shown that the transfer, disposal or merger, as the case may be” for “as respects a transfer or disposal unless it is shown that the transfer or disposal, as the case may be”,

and

(v) in section 636(2) by substituting “section 631, 632, 633, 633A, 633B, 633C or 634” for “section 631, 632, 633 or 634”,

and

(f) in Schedule 18A—

(i) by inserting the following after paragraph 1(3A)(a)(i):

“(ia) in a case in which (whether or not paragraph (a)(i)(I) also applies)—

(I) the company is an SE or an SCE resident in the State, and

(II) the asset was transferred to—

(A) the SE as part of the process of its formation by the merger by acquisition of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of the SE Regulation (within the meaning of section 630), or

(B) the SCE as part of the process of its formation by merger in accordance with Article 2 of the SCE Regulation (within the meaning of section 630),

are references to the asset becoming a chargeable asset in relation to the SE or (as the case may be) the SCE or, if at the time of the formation of the SE or (as the case may be) the SCE the asset was a chargeable asset in relation to a company which ceased to exist as part of the process of the formation of the SE or (as the case may be) the SCE, to the asset becoming a chargeable asset in relation to that company;”,

(ii) in paragraph 1(3A)(b) by inserting “or, if the company is an SE or an SCE, by reason of the asset having been transferred to the SE or (as the case may be) the SCE on its formation” after “at that time”, and

(iii) in paragraph 1(6)(a) by inserting “or (3A)” after “subsection (3)”.

³OJ No. L294, 10.11.2001, p.1

⁴OJ No. L207, 18.8.2003, p.1

⁵OJ No. L294, 10.11.2001, p.1

⁶OJ No. L207, 18.8.2003, p.1