Intra Group Transfers

Businesses carry out intra-group reorganisations for several reasons, including:

• To boost administrative, operational or economic efficiencies (for example, centralising business support functions, such as accounts, public relations and human resources or creating greater economies of scale through combining the purchasing power of the group in relation to suppliers, stock and for raw materials);
• As a precursor to an acquisition or sale of a company or business (for example, the target wishes to sell part but not all of its business, or it wishes to amalgamate its business to provide a greater opportunity for a potential purchaser);
• After the acquisition of a company or business (for example, the business and assets may be hived up, down or across into another existing operating group company, or land or intellectual property may be transferred to another group company and leased back to the operating company); or
• To secure tax advantages and create a more tax-efficient group structure (for example, rearranging cash flows, transferring property and assets, amalgamating subsidiaries or creating new companies).

Taxation

When selling shares or assets in the course of a reorganisation, there are many taxes that may arise or may need to be considered:

• Stamp duty chargeable on shares, other marketable securities and certain transactions involving partnerships;
• SDLT chargeable on the transfer of property;
• In respect of an asset sale, VAT unless the assets that are the subject of the transfer are exempt. However, no VAT is chargeable where it can be shown that business assets are transferred as a going concern (TOGC) within the meaning of Article 5 of the VAT (Special Provisions) Order 1995);
• Other taxes such as corporation / capital gains taxes (if relevant).

It is important to understand the relevant tax consequences of any reorganisation.

There are also various reliefs and exemptions that may apply to certain taxes and arrangements.

Our corporate lawyers can refer you to tax specialists with whom we regularly work to advise on taxes, reliefs, and exemptions.

We can also liaise with them to seek statutory and non-statutory clearances from HMRC for reorganisations.

Implementation

Intra group transactions are often implemented and documented less formally than arm's length transactions.

For corporate governance reasons, however, it is advisable to follow proper processes (for example, seeking consent from third parties where required, satisfying bank requirements and complying with TUPE) and properly document reorganisations.

This will especially be helpful when sharing such information with HMRC if they request to see the relevant documentation.

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