The Government has in response to tax representations from various industry groups and advisers, including CMS Cameron McKenna, decided to amend its proposals on IP-related transfers and the continuing availability of EMI, CVS, VCT and EIS tax reliefs.
Budget proposals meant that placing holding companies on top of companies with IP activities would cause these reliefs to be lost. Holding companies are commonly created for commercial reasons as a preliminary to flotation, for example, and so this change would have created considerable difficulties. The effect of the Government amendments is that the insertion of a holding company will no longer cause problems.
For background on the relevant legislation and the problems caused by the Budget proposals, please click here.
It will still, however, be the case that the various reliefs will not be available where a company acquires an IP company for cash or the acquiring company already has an existing shareholder base of its own. This is consistent with the Government’s policy objective that third-party IP should not be capable of being brought into a group either by way of asset or company purchases and benefit from these tax reliefs. Up until now, it has been a slight loophole that if an asset has been brought into a group, it cannot qualify, but if the company owning the asset is acquired, that has been acceptable.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 01/06/2007.
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