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Modification to cap on deduction allowable to amalgamated company in respect of capital expenditure under section 37O of Act

Income Tax (Amalgamation of Companies) Regulations 2011

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—(1) This regulation applies for the purpose of computing the total amount of deduction to be allowed under section 37O of the Act to the amalgamated company for all qualifying acquisitions of ordinary shares in one or more companies the dates of acquisition of which fall within the basis period of amalgamation, including any past acquisition for which it is entitled to a deduction under that section by virtue of regulation 12E.(2) In computing the total amount of deduction referred to in paragraph (1) —(a)the references to “$100 million” in section 37O(11) of the Act shall each be read as a reference to the amount computed in accordance with the formula:where Z1is the aggregate of every amount of capital expenditure — (i)incurred by an amalgamating company for a past acquisition (whether or not for the same target company) under section 37O(4) of the Act before the date of amalgamation but during the basis period of amalgamation; and (ii)for which a deduction is allowed to the amalgamating company under section 37O of the Act or to the amalgamated company under that section read with regulation 12B or 12C;(aa)every reference to $20 million in section 37O(11A) of the Act is a reference to the amount computed in accordance with the formula $20 million – Z2, where Z2 is the total of every amount of capital expenditure —(i)incurred by an amalgamating company for a past acquisition (whether or not for the same target company) under section 37O(4A) of the Act before the date of amalgamation but during the basis period of amalgamation; and(ii)for which a deduction is allowed to the amalgamating company under section 37O of the Act or to the amalgamated company under that section read with regulation 12B or 12C;(b)the aggregate amount referred to in section 37O(11)(b)(ii) of the Act and the sum mentioned in section 37O(11A)(b)(ii) of the Act shall be substituted with the aggregate of every amount of capital expenditure in the form of contingent consideration incurred by the amalgamated company for a qualifying acquisition of ordinary shares in another company referred to in paragraph (1), including a past acquisition referred to in that paragraph;(c)the reference to $5 million in section 37O(11B)(a) of the Act is a reference to the amount computed in accordance with the formula $5 million – Z3, where Z3 is the total of —(i)the amount determined by the formula 0.05 × A in section 37O(8) of the Act in respect of every acquisition (whether or not for the same target company) under section 37O(4) of the Act made by an amalgamating company before the date of amalgamation but during the basis period of amalgamation; and(ii)the amount determined by the formula 0.25 × A in section 37O(8A) of the Act in respect of every acquisition (whether or not for the same target company) under section 37O(4A) of the Act made by an amalgamating company before the date of amalgamation but during the basis period of amalgamation; and(d)every reference to $5 million in section 37O(11B)(b) of the Act is a reference to the amount computed in accordance with the formula $5 million – Z4, where Z4 is the sum of Z3 and the total of —(i)the amount determined by the formula 0.05 × B in section 37O(9) of the Act in respect of every acquisition (whether or not for the same target company) under section 37O(4) of the Act made by an amalgamating company before the date of amalgamation but during the basis period of amalgamation;(ii)the amount determined by the formula 0.25 × B in section 37O(9A) of the Act in respect of every acquisition (whether or not for the same target company) under section 37O(4A) of the Act made by an amalgamating company before the date of amalgamation but during the basis period of amalgamation;(iii)the amount determined by the formula 0.05 × D in section 37O(10) of the Act in respect of every acquisition (whether or not for the same target company) under section 37O(4) of the Act made by an amalgamating company before the date of amalgamation but during the basis period of amalgamation; and(iv)the amount determined by the formula 0.25 × D in section 37O(10A) of the Act in respect of every acquisition (whether or not for the same target company) under section 37O(4A) of the Act made by an amalgamating company before the date of amalgamation but during the basis period of amalgamation.(3) In this regulation —“basis period of amalgamation” means the basis period for a year of assessment in which the amalgamation takes place;“past acquisition” means a qualifying acquisition of ordinary shares in a company made by an amalgamating company the date of which falls within the basis period of amalgamation but is before the date of amalgamation.

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