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Amendments are to be made to the corporation tax rules for capital gains of companies.
The changes, which have effect from 6 January 2010, will ensure that a postponed charge on gains arising where assets of an overseas branch are transferred to a non-resident company is brought back into charge at the appropriate time.
The amendments affect UK companies that transfer assets of an overseas branch to a non-resident company in exchange for securities consisting of shares or loan stock. In these circumstances corporation tax on gains arising from the transfer is postponed until the disposal of the securities.
In some situations, however, the security received in exchange can be an exempt asset. Where loan stock is received it can fall within the definition of a qualifying corporate bond (QCB) which is exempt from capital gains tax under TCGA 1992, s 115.
Under the proposed legislative change where a gain on the transfer of an overseas branch’s assets to a non-resident company in exchange for securities has been postponed, the disposal of securities will create a deemed gain that is chargeable to tax.
Instead of treating the postponed gain as additional consideration for the disposal of an exempt asset, a separate chargeable gain equal to the postponed gain will be deemed to accrue at the time of disposal of the securities.
This change will apply where the securities themselves are exempt from a charge to tax.
See here for further details.
