YC 13 Corporate spin-outs
When this section applies

(1)

This section applies if—

(a)

a share in a company (the spun-out company) is transferred or issued to a shareholder in another company (the original parent); and

(b)

before the transfer or issue, the original parent is treated, under section YC 11(3), as holding a voting interest or market value interest in another company (the spun-out subsidiary); and

(c)

before the transfer or issue, the original parent is treated as holding an interest in the spun-out company that is a voting interest of more than 50% or, if a market value circumstance exists, a market value interest of more than 50%, both calculated as if section YC 4 did not apply to treat the original parent’s interests in the spun-out company as being held by others; and

(d)

at the time of the transfer or issue, the original parent is a limited attribution company; and

(e)

after the transfer or issue, the spun-out company is treated under section YC 11(3) as holding the voting interest or market value interest in the spun-out subsidiary; and

(f)

after the transfer or issue, the spun-out company is, at all times during the relevant period described in subsection (3), a limited attribution company.

Overriding look-through rule for spun-out company

(2)

Section YC 4 is overridden and the spun-out company is treated as holding the voting interest or market value interest in the spun-out subsidiary—

(a)

for the period before the transfer or issue that the original parent was treated as holding the interest; and

(b)

for the purposes of applying the continuity provisions from the date of the transfer or issue; and

(c)

to the extent to which, immediately after the transfer or issue, a group of persons exists who hold common interests in the original parent and the spun-out company, calculated on the assumption that the only voting interests and market value interests in those companies are those treated as held by those companies under section YC 11(3).

Meaning of relevant period

(3)

In subsection (1)(f), relevant period means—

(a)

in relation to the offset of a loss under Part I (Treatment of tax losses), the period from the date of the transfer or issue until the last day of the period in which the loss is offset:

(b)

in relation to a credit subject to a continuity provision, the period from the date of the transfer or issue until the date the credit is cancelled by a subsequent debit.

Meaning of common interest

(4)

In subsection (2)(c), common interest means—

(a)

if a market value circumstance does not exist for the original parent or the spun-out company, the common voting interest described in subsection (5):

(b)

if a market value circumstance exists for the original parent but not the spun-out company, the lower of—

(i)

the common voting interest described in subsection (5); and

(ii)

the market value interest in the original parent:

(c)

if a market value circumstance exists for the spun-out company but not the original parent, the lower of—

(i)

the common voting interest described in subsection (5); and

(ii)

the market value interest in the spun-out company:

(d)

if a market value circumstance exists for the original parent and the spun-out company, the lower of the common voting interest described in subsection (5) and the common market value interest described in subsection (6).

Meaning of common voting interest

(5)

In subsection (4), common voting interest, for a person in relation to the original parent and the spun-out company, means—

(a)

the percentage voting interest of the person in each company, if the percentages are the same:

(b)

the lower of the percentage voting interests of the person in the companies, if the percentages differ.

Meaning of common market value interest

(6)

In subsection (4), common market value interest, for a person in relation to the original parent and the spun-out company, means—

(a)

the percentage market value interest of the person in each company, if the percentages are the same:

(b)

the lower of the percentage market value interests of the person in the companies, if the percentages differ.

Common interests: look-through rules partially overridden

(7)

For the purposes of measuring common interests, neither section YB 21 (Transparency of nominees) nor YC 4 apply to treat a nominee’s or company’s voting interest or market value interest in the original parent or the spun-out company to be held by another person, if the interest the other person would be treated as holding would be less than 10%.

Defined in this Act: common interest, common market value interest, common voting interest, company, continuity provisions, group of persons, limited attribution company, market value circumstance, market value interest, relevant period, share, shareholder, voting interest

Compare: 2004 No 35 s OD 5(6A)–(6F)

Section YC 13(1)(c): substituted (with effect on 1 May 2011), on 29 August 2011, by section 132 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).