Taxes Consolidation Act 1997 section 701

Transfer of shares held by certain societies to members of society

Section 701 provides relief from corporation tax and capital gains tax where an agricultural or fisheries co-operative transfers shares it owns in a subsidiary company to its members in return for the cancellation of the members' shares in the co-operative.

• Where a co-operative transfers shares in a subsidiary to its members in proportion to their holdings, and the members' co-operative shares are cancelled in return, the transfer is not treated as a distribution and is deemed to give rise to no gain and no loss for the co-operative.
• The cancellation of the members' co-operative shares is not treated as a disposal, and each member is treated as having acquired the new shares at the same time and for the same consideration as the original co-operative shares.
• Where the co-operative's assets include more than just the subsidiary shareholding, only a proportionate number of the members' shares (the "referable shares") are cancelled, calculated by a formula based on relative market values.
• The relief applies only where the transfer is made for bona fide commercial reasons and does not form part of a tax avoidance arrangement, and the co-operative must report the number of shares cancelled in its corporation tax return.