LAM13100 - Transfers of long-term business: Other tax consequences of business transfers: expenses: corporation tax liabilities

In general many expenses incurred in connection with the acquisition or sale of a business are likely to be capital expenditure. It will also be the case that some of the costs incurred in connection with the transfer of an insurance business under Part VII of the Financial Services and Markets Act 2000 may also be capital in nature. Further guidance can be found at BIM35525.

FSMA 2000/Part VII provides a statutory scheme for the transfer of assets and liabilities of an insurance business and it is possible for all of the property of the transferor to be transferred in this way. Each scheme is unique and the court has extensive supplementary powers to facilitate the transfer. It is common for the rights and liabilities of the transferor firm to become the rights and liabilities of the transferee to a greater or lesser degree. That can include tax assets and liabilities in the same way as other types of property. In some circumstances the scheme can even require the dissolution of the transferor immediately following the business transfer although that would be unusual in the case of a Life company.

Problems can sometimes arise when the transferor is wound up or dissolved and it has outstanding corporation tax repayments or amounts due because, after dissolution, a company no longer has any legal personality or capacity to act. It is possible for the right to recover CT, or a liability to pay CT, to transfer to the transferee company if that is the effect of the Court Order and the asset or liability exists at the time of the transfer. However the right to submit and amend returns (including the making of claims) cannot be transferred because the procedural tax machinery is unaffected by the Part VII procedure. This distinction arises because the ability to file a tax return is a matter of legal capacity rather than property.

VAT and Stamp Duty issues can occur in the context of Part VII transfers. They are unlikely to arise in a group context because there are reliefs under both heads of duty for intragroup transactions. In the case of VAT any questions should be raised directly with the group’s CCM. In the case of Stamp Duty the relevant specialist should be contacted.