Section 625 Shares in subsidiary member of group

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(1)(a) This section shall apply if a company (in this section referred to as "the subsidiary") ceases to be a member of a group of companies, and on an earlier occasion shares in the subsidiary were disposed of by another company (in this section referred to as "the chargeable company") which was then a member of that group in the course of an amalgamation or reconstruction in the group, but only if that earlier occasion fell within the period of 10 years ending on the date on which the subsidiary ceases to be a member of the group.

(b) References in this section to a company ceasing to be a member of a group of companies shall not apply to cases where a company ceases to be a member of a group by being wound up or dissolved or in consequence of another member of the group being wound up or dissolved.

When do these rules apply?

(1) These rules apply where a group member (the chargeable company) disposes of shares in a subsidiary as part of a reconstruction or amalgamation, and the subsidiary leaves the group within 10 years of that disposal....

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(2) The chargeable company shall be treated for the purposes of the Capital Gains Tax Acts as if immediately before the earlier occasion it had sold and immediately reacquired the shares referred to in subsection (1)(a) at market value at that time.

How am I treated as the chargeable company?

(2) As the chargeable company, you are treated as having, immediately before the earlier disposal, sold and immediately reacquired the shares at market value.

(3) Where before the subsidiary ceases to be a member of the group the chargeable company has ceased to exist, or a resolution has been passed, or an order made, for the winding up of the company, or any other act has been done for the like purpose, any corporation tax to which, if the chargeable company had continued in existence, it would have been chargeable in consequence of this section may be assessed and charged (in the name of the chargeable company) on the company which is, at the time when the subsidiary ceases to be a member of the group, the principal company of the group.

Where the chargeable company is liquidated before the subsidiary leaves the group, who can be liable for the tax?

(3) Where your chargeable company is liquidated before the subsidiary leaves the group, tax due as a result of the subsidiary's departure may be charged to the group's principal company.

(4) Where any of the corporation tax assessed on a company in consequence of this section, or in pursuance of subsection (3), is not paid within 6 months from the date when it becomes payable, then―

(a) a company which is on that date, or was on the earlier occasion, the principal company of the group, and

(b) any company taking an interest in the subsidiary as part of the amalgamation or reconstruction in the group,

may at any time within 2 years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or any part of that tax, and a company paying any amount of tax under this subsection shall be entitled to recover a sum of that amount from the chargeable company or, as the case may be, from the company assessed under subsection (3).

Can tax which is not paid by me as a chargeable company be recovered from another group member?

(4) Assessed tax which, as a chargeable company, you have not paid within six months of the due date, may, within two years of the due date, be charged to the principal company of the group and any company that acquired an interest in the subsidiary ...

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(5) Notwithstanding any limitation on the time for making assessments, an assessment to corporation tax chargeable in consequence of this section may be made at any time within 10 years from the time when the subsidiary ceased to be a member of the group and, in relation to any disposal of the property after the earlier occasion, there shall be made all such adjustments of tax, whether by means of assessment or by means of discharge or repayment of tax, as may be required in consequence of this section.

What time limits apply for assessments?

(5) Assessments to collect tax due when a subsidiary leaves a group may be made any time up to 10 years after the company has left the group....

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(6) For the purposes of this section, there shall be a disposal of shares in the course of an amalgamation or reconstruction in a group of companies if―

(a) section 586 or 587 applies to shares in a company so as to equate them with shares in or debentures of another company, and

(b) the companies are members of the same group or become members of the same group as a result of the amalgamation or reconstruction.

When is there a disposal of shares as part of a reconstruction or amalgamation?

(6) A disposal of shares as part of a reconstruction or amalgamation means a disposal for which:...

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(7) Where by virtue of section 587 shares are to be treated as cancelled and replaced by a new issue, references in this section to a disposal of shares include references to the occasion of the shares being so treated.

Does a disposal of shares include the cancellation of shares replaced as part of a reconstruction or amalgamation?

(7) A disposal of shares also includes the cancellation of shares that are replaced by a new issue, as part of a reconstruction or amalgamation (section 587).