Chapter SDLTM23082
| Published date | 19 March 2016 |
| Record Number | SDLTM23082 |
Withdrawal: Occasions when relief not withdrawn - subsequent transfer of purchaser following vendor leaving group
Change in control
Paragraph 4AZ (5) of Schedule 7 states that there is a change in control of the p;urchaser if:
a) a person who controls the purchaser (alone or with others) ceases to do so,
b) a person obtains control of the purchaser (alone or with others) or,
c) the purchaser is wound up
Paragraph 4ZA (8) of Schedule 7 provides that any references to control are to be interpreted in accordance with section 416 of the Taxes Act 1988.
This defines control as:
- Control over the affairs of the company
- Control through voting power
- Control through share capital or through issued share capital
- Control over income of the company
- Control over the assets of the company
Further information concerning control is available at CTM60200+
Circumstances where HMRC consider there has not been a change in control.
Appointment of a liquidator
The appointment of a liquidator results in a company losing its beneficial interest in its assets, including any shares in it owns in other companies (Ayerst v C&K Construction) Ltd 50 TC651.
Without special provision, the commencement of a winding up of a holding company within a group would result in the breaking up of a group. This may present difficulties for groups undertaking genuine reorganisations.
To address these concerns HMRC will not view the appointment of a liquidator as resulting in a change of control of a company for the purposes of sub-paragraph (5) (b), provided that the liquidation can be shown to be part of a scheme of reconstruction which involves a successful claim to a further relief or where the economic ownership of the relevant assets remains within the group.
New intermediate holding company
Sub-paragraph (6) provides that a change in control does not arise where a new holding company is inserted either between the original ultimate parent company and its shareholders, or between the purchaser and the parent company with no change in overall economic ownership of the group. This is because HMRC will look at the ultimate shareholding in order to establish whether there has been a change of control.
Loan Creditors
Sub-paragraph (7) provides that where there is change in control of the purchaser because of a loan creditor, then group relief will not be withdrawn if the persons who controlled the purchaser before that change continues to do so. This ensures that difficulties will...
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