Corporation Tax Act 2010 section 356JK

Disposal of equity share: transfer of allowance

Section 356JK deals with the transfer of cluster area allowance when a company disposes of all or part of its equity share in a licensed area or sub-area that falls within a cluster area, setting out the rules for calculating minimum and maximum transferable amounts and the election process.

• When a company (the transferor) disposes of its equity share in a licensed area within a cluster area, it may elect to transfer a specified amount of cluster area allowance to the acquiring company or companies (transferees), provided the maximum transferable amount exceeds zero.
• The transferable amount must fall between a calculated minimum and maximum; if no election is made, the minimum transferable amount (if greater than zero) passes automatically to the transferees.
• The election must be made within 60 days of disposal, must specify the disposal date, the amount of allowance transferred and the identity of the transferees, and once made it is irrevocable.
• The minimum and maximum transferable amounts are determined by formulae that take into account the total generated allowance attributable to the licensed area, any previously activated allowance, the proportion of equity disposed of, and any unactivated allowance remaining with the transferor.

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