Transfer of Business Assets

Section 615 operates where, on a reconstruction or amalgamation, a company takes over the whole or part of the business of another company and that other company receives no consideration for the transfer of the business other than the taking over of its liabilities. The section provides that no corporation tax is to be charged in respect of chargeable gains accruing to the transferor company, but the transferee company is to be treated as if it had acquired the assets at the time and the price at which they were acquired by the transferor company. This section does not apply to trading stock.

To qualify for relief under this section –

• The scheme must involve the transfer of the whole or part of a company’s business to another company
• The acquiring company must be resident in the State at the time of the acquisition or the assets are chargeable assets in relation to that company immediately after the transfer
• The transferor company must be resident in the State at the time of the acquisition or the assets are chargeable assets in relation to that company immediately before the transfer
• The transferor company must receive no consideration for the transfer, apart from the other company taking over the whole or part of its business liabilities.

The transferor company is treated as having disposed of the assets with no loss or gain arising. The transferee company, for the purposes of calculating indexation relief on eventual disposal, is treated as having acquired the assets at the time and price at which they were acquired by the transferor company.

Consequently, when the acquiring company eventually sells the assets to some third party the gains made by both the first and the second companies will at that time be brought into charge and indexation relief applies accordingly.

Relief does not apply to the issue of shares by a company under a scheme of reconstruction or amalgamation unless that scheme is effected for bona fide commercial reasons and not as part of a tax avoidance scheme.

Where a bona fide reconstruction takes place to which the provisions of Section 587 and 615 apply, it is not the practice of Revenue to invoke a distribution charge under Section 130 TCA 1997.

Transactions involving family company partitions are dealt with in Tax Briefing Issue 44.