CTM80600 - Consortia: group relief: arrangements to transfer the company owned by a consortium to another group or consortium

CTA10/S155

Even though a company may otherwise satisfy the conditions for:

  • surrender of relief to, or
  • claim to relief from,

the members of a consortium, the conditions are deemed not to be satisfied for the accounting period of claim if certain 鈥榓rrangements鈥� are in existence at a time material to the claim. 鈥楢rrangements鈥� for this purpose are specified in CTA10/SS155(3) and 156(2) and are described in CTM80605 onwards.

In general, the type of arrangements that CTA10/S155 aims at are those that would permit the company held by a consortium to switch to a group situation; however CTA10/S155 applies in every case where arrangements exist. There is no requirement for a purpose of the arrangements to include a tax advantage.

The term 鈥榓rrangements鈥� means arrangements of any kind whether in writing or not. Therefore the legislation covers both arrangements which are:

  • binding on the parties,

and

  • less formal in character and not necessarily binding.

Arrangements may be a matter of specific agreement or inherent in the capital structure of a company. Examples of inherent arrangements are where:

  • the majority of the voting rights in a company are held other than by the purported parent, or
  • such majority control, though not at present so held, can be acquired through the exercise of conversion rights attaching to the company鈥檚 loan or debenture stock.

The definition of 鈥榗ontrol鈥� for the purposes of CTA10/S155 is in CTA10/S1124. S1124 does not define 鈥榗ontrol鈥� merely in terms of direct shareholdings and voting rights in the company concerned. If they affect the 鈥榗ontrol鈥� situation:

  • the shareholdings and voting rights in any company,

and also

  • the powers conferred by the documents regulating any company,

may also have to be considered.

In order to determine whether relevant arrangements exist, it will be necessary to consider:

  • the Memorandum and Articles of Association of the company,
  • any other document regulating the company,

and

  • the various documents relating to loans made to the company.

Where a company other than the parent company holds the shares, etc, it may also be necessary to consider the shareholdings, etc, of that company.