Johnston Publishing North Limited v Her Majesty's Revenue & Customs, SPC 00564
| Jurisdiction | UK Non-devolved |
| Judge | John CLARK |
| Judgment Date | 09 October 2006 |
| Respondent | Her Majesty's Revenue & Customs |
| Appellant | Johnston Publishing North Limited |
| Reference | SPC 00564 |
| Court | First-tier Tribunal (Tax Chamber) |
SPC00564
Corporation tax on chargeable gains – whether exemption from degrouping charge under s 179 TCGA 1992 available to companies associated at time of leaving group but not associated at time of the intra-group transfer
JOHNSTON PUBLISHING (NORTH) LIMITED Appellant
- and -
Special Commissioner: JOHN CLARK
Sitting in public in London on 21 July 2006
John Gardiner QC and Philip Walford, Counsel, instructed by Nabarro Nathanson, for the Appellant
Christopher Tidmarsh QC, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2006
DECISION
-
The issue in this case is whether, in relation to the capital gains degrouping charge imposed in certain circumstances on companies leaving a group, it is necessary in order for associated companies to qualify for exemption from the charge that they should have been associated not only at the time of leaving the group but also at the time of the previous intra-group transfer. At the time when it left the “UNM Group”, the Appellant, referred to in this decision by its initials at the time of the relevant transactions as “UPNH Ltd”, owned the transferor company, “UPN Ltd”; at the time of the previous intra-group transfer, UPNH Ltd and UPN Ltd were not associated. UPNH Ltd contends that association at that previous time is not a requirement imposed by the legislation; the Respondents (referred to in this decision in relation to all material times as “HMRC”) contend that the legislation does impose that requirement.
-
The relevant legislation at the time of the transactions in question was in the following form, all the provisions falling within the Taxation of Capital Gains Act 1992. (Except where indicated otherwise, references to sections in this decision are to sections of that Act.)
“171 Transfers within a group: general provisions
(1) Notwithstanding any provision in this Act fixing the amount of the consideration deemed to be received on a disposal or given on an acquisition, where a member of a group of companies disposes of an asset to another member of the group, both members shall, except as provided by subsections (2) and (3) below, be treated, so far as relates to corporation tax on chargeable gains, as if the asset acquired by the member to whom the disposal is made were acquired for a consideration of such amount as would secure that on the other's disposal neither a gain nor a loss would accrue to that other; but where it is assumed for any purpose that a member of a group of companies has sold or acquired an asset, it shall be assumed also that it was not a sale to or acquisition from another member of the group. …”
“179 Company ceasing to be member of group: post-appointed day cases
(1) If a company ("the chargeable company") ceases to be a member of a group of companies, this section shall have effect as respects any asset which the chargeable company acquired from another company which was at the time of acquisition a member of that group of companies, but only if the time of acquisition fell within the period of 6 years ending with the time when the company ceases to be a member of the group; and references in this section to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a member of a group in consequence of another member of the group ceasing to exist.
(2) Where 2 or more associated companies cease to be members of the group at the same time, subsection (1) above shall not have effect as respects an acquisition by one from another of those associated companies.
…
(3) If, when the chargeable company ceases to be a member of the group, the chargeable company, or an associated company also leaving the group, owns, otherwise than as trading stock—
(a) the asset, or
(b) property to which a chargeable gain has been carried forward from the asset on a replacement of business assets,
then, subject to subsection (4) below, the chargeable company shall be treated for all the purposes of this Act as if immediately after its acquisition of the asset it had sold, and immediately reacquired, the asset at market value at that time.
…
(5) Where, apart from subsection (6) below, a company ceasing to be a member of a group by reason only of the fact that the principal company of the group becomes a member of another group would be treated by virtue of subsection (3) above as selling an asset at any time, subsections (6) to (8) below shall apply.
…
(10) For the purposes of this section—
(a) 2 or more companies are associated companies if, by themselves, they would form a group of companies, . . . ”
The facts-
The evidence consisted of a Statement of Agreed Facts, and a bundle of documents. There was no oral evidence. Structure diagrams of the position at various stages of the relevant transactions were provided; no attempt has been made to reproduce these in this decision. About three weeks after the hearing, the parties supplied a CD containing case materials, namely arguments, commentary on HMRC’s arguments, the diagrams, and the Statement of Agreed Facts. The following description of the transactions giving rise to the matters in dispute is largely based on the Statement of Agreed Facts.
-
UPNH Ltd is, and was at all material times, a private limited company, incorporated and registered in England and Wales and resident in the United Kingdom On 7 July 1997, United Business Media Group Limited (which, at all material times, was incorporated under the name of United News & Media Group Limited) (“UNMG Ltd”) acquired UPNH Ltd as an off-the-shelf company: UNMG Ltd acquired the entire issued share capital, consisting of two ordinary shares of £1 each. At all material times, UNMG Ltd was a member of the United News & Media group of companies (“the UNM Group”) of which United Business Media Plc (which, at all material times, was incorporated under the name of United News & Media Plc) (“UNM Plc”) was the ultimate parent company. Accordingly, on becoming a subsidiary of UNMG Ltd, UPNH Ltd also became a member of the UNM Group within the meaning of s 170.
-
Following the registration of UNMG Ltd as shareholder, UPNH Ltd, on 7 July 1997, made a rights issue of 9,998 ordinary £1 shares to UNMG Ltd, for a total consideration of £314,700,000.
-
The following stage involved the sale by UPN Ltd of certain subsidiaries to UPNH Ltd. At all material times prior to its sale to UPNH Ltd as described below, Regional Independent Media Limited (which, at all material times, was incorporated under the name of United Provincial Newspapers Limited) (“UPN Ltd”) was a wholly-owned subsidiary of United Regional Newspapers Limited (“URN Ltd”). At all material times URN Ltd was a member of the UNM Group; accordingly, UPN Ltd, while a subsidiary of URN Ltd was also a member of the UNM Group. UPN Ltd owned shares in certain companies (“the Operating Subsidiaries”); these were the subject of the subsequent sale to UPNH Ltd.
-
Following the making of the rights issue by UPNH Ltd, the registration of UNMG Ltd as holder of the additional 9,998 shares in UPNH Ltd, and the payment to UPNH Ltd of the consideration for them, UPN Ltd and UPNH Ltd entered into an agreement (“the First Agreement”) on 7 July 1997 for the sale to UPNH Ltd of UPN Ltd’s shares in the Operating Subsidiaries for a total consideration of £310,000,000 with completion to take place immediately.
-
Pursuant to, and after entering into the First Agreement, UPNH Ltd, on 7 July 1997, acquired UPN Ltd’s shares in the Operating Subsidiaries was registered as the owner of those shares, and paid UPN Ltd the purchase consideration of £310,000,000. Pursuant to s 171 TCGA 1992, the disposal of the shares in the Operating Subsidiaries by UPN Ltd and their acquisition by UPNH Ltd were treated as being for a consideration that gave...
To continue reading
Request your trial