for shares to be sold in a company which has been the recipient of such capital distributions. The Buyer may consider that it needs protection from Section 189 tax as the Company may have received a capital distribution shortly before Completion. If the corporate Seller does not settle the tax on the disposals of the capital assets, this tax can be collected from the Company. It is possible that this liability may settle on the Company in any event, by virtue of Section 179, TCGA.
6.5 The circumstances in which the Sellers may need protection are if some form of reconstruction is undertaken shortly before Completion, with some assets being distributed to the Sellers. If the Company then fails to pay the tax on the chargeable gain, such tax will be payable by the Sellers.
6.6 Section 189(4) uses virtually the same wording as used in Section 139(7) as described above.
7Section 190, Taxation of Chargeable Gains Act 1992
7.1 This section provides for tax on chargeable gains to be recovered from another group company or from a controlling director in certain circumstances.
7.2 If the company which is primarily chargeable to the corporation tax on the chargeable gain fails to pay, the principal company of the group at the time of the disposal, or any other company in the group which owned the asset in the 12 months prior to the date of the chargeable disposal, can be required to pay the tax. 7.3 If the tax is primarily payable by a non-UK company which has a permanent establishment in the UK, any controlling director can be made to pay the tax. A controlling director is a person who is a director and controls it, using the normal control tests as set out in Section 416, ICTA. 7.4.1 the Company may have owned a chargeable asset which was transferred to another company in the Seller group shortly before Completion. If tax on a further disposal within the next 12 months is not paid, that tax can be visited on the Company; 7.4.2 the Company may have disposed of a chargeable asset and the Completion Accounts may include an appropriate provision for the tax on the chargeable gain. If the Buyer does not procure the payment of that tax, then it is payable by the principal company in the Seller group, or any other group member which previously owned the asset. 7.5 Section 190(11) reads: “A person who has paid an amount in pursuance of a notice under this section may recover that amount from the taxpayer company.” Unlike Sections 139 and 189 there is no express reference to interest charged under the Taxes Management Act, but such interest must be considered as included in the above wording. 7.4 Both the Buyer and the Sellers need protection in respect of this potential liability:
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