Taxes Consolidation Act 1997 section 424

Effect of arrangements for transfer of company to another group, etc

Section 424 prevents abuse of group relief by treating a company as outside its group where arrangements exist to move it — or its trade — to another group or consortium in order to exploit its tax losses or other reliefs.

• Where arrangements exist to detach a company from its current group and attach it (or its trade) to another group containing a third company, the company is treated as not being a member of its original group for group relief purposes.
• The same applies where arrangements would give a third party control of the company but not of the other group member, or allow a third company to take over the trade.
• For consortium-owned trading companies, group relief surrender is blocked where arrangements exist for the company to become a 75% subsidiary of a third company, for minority shareholders to gain control, for any person to secure 75% or more of voting rights, or for a third company to take over the trade.
• These restrictions apply equally to a holding company that is a 90% parent of the trading company and is itself owned by the consortium.

---