Taxation (International and Other Provisions) Act 2010 section 371IC

What is the "qualifying value" of "relevant pre-acquisition funds or other assets"?

Section 371IC defines how to calculate the "qualifying value" of funds or assets already held by a target company when that company is acquired by a CFC group through a share-for-share exchange.

• When a CFC group acquires shares in a target company from unconnected persons, and the ultimate parent of the group issues its own shares as consideration, any funds or assets already held by the target company are called "relevant pre-acquisition funds or other assets".
• The qualifying value of those pre-acquisition funds or assets is the amount of their value that is reflected in the consideration paid for the target company's shares.
• If the consideration is not entirely in the form of newly issued parent company shares — for example, if cash is also paid, or if an extraordinary distribution is made to existing parent company shareholders in connection with the acquisition — the qualifying value must be reduced.
• The reduction percentage is calculated as: 100% × B ÷ (A + B), where A is the value of the share consideration issued to the sellers and B is the value of non-share consideration, any extraordinary distribution, or both combined.

---