H.M. TREASURY

EXPLANATORY NOTE

CLAUSE 122: TRANSFER OF PROPERTY BETWEEN ASSOCIATED COMPANIES: NORTHERN IRELAND

SUMMARY

This clause provides for a revised definition of ‘group’ for the purposes of the stamp duty relief for transfers of property between associated companies in Northern Ireland. The revised definition is aligned with the definition of ‘group’ for Corporation Tax group relief. The clause takes effect for instruments executed on or after the date the Finance Bill receives Royal Assent.

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DETAILS OF THE CLAUSE

Subsection (1) states that Section 11 Finance Act (Northern Ireland) 1954 shall be amended.

Subsection (2) amends Section 11 to provide that, to qualify as the parent of another company, a company must have beneficial entitlement to not less than 75% of the profits available for distribution to equity holders (new subsection (3AA)(b)) and 75% of the assets available for distribution to equity holders on a winding-up (new subsection (3AA)(c)). But this subsection is subject to subsection (3) below.

Subsection (3) ensures that a company shall not be regarded as the parent of another company if a person or persons has, or could obtain, control of one of the companies but not the other (new subsection (3AAA)).

Subsection (4) makes minor consequential amendments.

Subsection (5) applies the definitional schedule which operates in relation to Corporation Tax ‘group relief’ (Schedule 18 to the Income and Corporation Taxes Act (ICTA) 1988) to new subsections (3AA)(b) and (c). And it states that the meaning of "control" within new subsection (3AAA) will be as defined in Section 840 ICTA 1988.

Subsection (6) applies this section to instruments executed on or after Royal Assent.

BACKGROUND

The stamp duty relief for transfers of assets between companies within a group is open to exploitation because group membership can be readily manipulated. This clause aligns the rules for group membership, in relation to Northern Ireland, with those for Corporation Tax in order to prevent such abuse.

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