Corporation Tax Act 2010 section 1078

Division of business in a cross-border transfer

Section 1078 defines the circumstances in which a distribution arising from a cross-border division of a business can be treated as an exempt distribution for corporation tax purposes.

• A qualifying distribution occurs when a company transfers part of its business to one or more transferee companies, and those transferee companies issue shares to the members of the transferring company.
• The distribution is exempt if all the tests in section 140A(1A)(a) to (f) of TCGA 1992 are met, which relate to the division of a UK business on a cross-border basis.
• Alternatively, the distribution is exempt if all the tests in section 140C(1A)(a) to (e) of TCGA 1992 are met, which relate to the division of a non-UK business on a cross-border basis.
• This represents the third type of exempt distribution and ensures that genuine cross-border business reorganisations are not subject to a tax charge on the distribution element.