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Modifications to section 13W of Act (Exemption of gains or profits from disposal of ordinary shares)

Income Tax (Amalgamation of Companies) Regulations 2011

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—(1) The application of section 13W of the Act to any gains or profits derived by the amalgamated company from the disposal of ordinary shares in another company (referred to in this regulation as the investee company), being ordinary shares transferred to the amalgamated company by any of the amalgamating companies (referred to in this regulation as the transferor company) on the date of amalgamation, shall be subject to the modifications set out in this regulation.(2) In determining, for the purpose of section 13W(1)(b) of the Act, whether the amalgamated company has, at all times during a continuous period of at least 24 months ending on the date immediately prior to the date of disposal of the shares, legally and beneficially owned at least 20% of the ordinary shares in the investee company, the legal and beneficial ownership of the transferor company of the ordinary shares in the investee company shall be treated as that of the amalgamated company, and section 13W(4) of the Act shall apply accordingly.(3) The reference in section 13W(3) of the Act to outgoings and expenses wholly and exclusively incurred by the divesting company in the production of the gains or profits from the disposal of shares, including the expenses referred to in paragraphs (a) to (f) of that provision, include a reference to outgoings and expenses wholly and exclusively incurred by the transferor company in relation to the acquisition of the shares disposed of, including the expenses referred to in paragraphs (a) to (f) of that provision as they relate to such acquisition (with the reference in those paragraphs to money borrowed by the divesting company substituted with a reference to money borrowed by the transferor company).(4) For the purpose of section 13W(5) of the Act, the reference to an amount referred to in section 13W(6) of the Act which is attributable to any of the shares disposed of and which has been allowed as a deduction to the divesting company for any year of assessment prior to the year of assessment relating to the basis period in which the shares are disposed of, includes a reference to any such amount which is attributable to any of the shares disposed of and which has been allowed as a deduction to the transferor company for any year of assessment up to and including the year of assessment which relates to the basis period in which the date of amalgamation falls.(5) For the purpose of section 13W(7) of the Act, the reference to any write‑back for a diminution in the value of the shares, or profit recognised in accordance with FRS 39, SFRS for Small Entities, FRS 109 or SFRS(I) 9 (as the case may be), which is attributable to any of the shares disposed of, and which has been charged to tax as income of the divesting company for any year of assessment prior to the year of assessment relating to the basis period in which the shares are disposed of, includes a reference to such write‑back or profit which is attributable to any of the shares disposed of and which has been charged to tax as income of the transferor company for any year of assessment up to and including the year of assessment which relates to the basis period in which the date of amalgamation falls.

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