308A Assets transferred in course of scheme of reconstruction or amalgamation

Summary

This section provides that the transfer of trade assets in the course of a merger will not give rise to a balancing charge. The balancing charge is deferred by providing that any capital allowances due to (or balancing charge on) the acquiring company in respect of the assets transferred are computed according to the rules that would have applied if the merger or division had not taken place. The section ensures that Irish legislation is in accord with the EU Mergers Directive². This section has effect in relation to assets transferred on or after 1 January 2010.

Details

Definition

(1) A scheme of reconstruction or amalgamation is defined as a scheme for the reconstruction of any company or companies, or the amalgamation of two or more companies.

Application

(2) The section applies where the whole or part of the trade of a company which is resident in the State or is carrying on the trade in the State through a branch or agency up to the time of the transfer, is-

1. transferred to another company, which is resident in the State at the time of transfer or which is going to use the assets of the transferred trade to carry on a trade in the State through a branch or agency immediately after the transfer, and
2. the transferring company receives no consideration for the transfer other than the taking over of its liabilities by the other company,

then subsection (3) applies to the assets transferred.

(3) The company receiving the assets gets the allowances which the disposing company would have received if it had continued to carry on the trade and use the assets for the purposes of the trade. The transfer of the assets does not give rise to a balancing allowance or a balancing charge under section 307 or section 308.

Application of section 400

(4) The provisions of subsection (3) do not apply to assets transferred where subsections (6) to (9) of section 400 apply. Section 400 provides a similar relief where a trade carried on by a company within the charge to Irish corporation tax becomes carried on by another company within that charge, provided that the trade (or a 75% per cent interest in it) is owned by the same persons before and after the transaction. If both sections apply to a transaction, section 400 applies to it and this section does not.

This section has effect in relation to assets transferred on or after 1 January 2010.

Relevant Date: Finance Act 2019