time in respect of corporate transactions. As the tax charge therefore arises at exactly the point of sale, the Buyer is concerned to make sure that this charge is the liability of the Seller, under the provisions of the tax covenant. The Tax that is the obligation of the Seller is the Tax arising on or before Completion. 3.7 It is possible, under Section 179A for the Seller group to elect that the chargeable gain under Section 179 is treated as accruing to another company in that group. It is therefore common when a company is being sold out of a group for provisions to be included in the tax covenant requiring the Buyer to procure that the Company signs the joint election, so as to enable this transfer to happen. 3.8 There is a similar degrouping charge in respect of intangible assets transferred intra group into company A within the previous 6 years under Section 780, CTA (formerly Paragraph 58, Schedule 29, Finance Act 2002). This applies to intangible assets that were acquired or created after 1 April 2002. The period of concern is 6 years and it is again the transferee which is deemed to have sold the intangible asset at market value and repurchased it immediately after its actual acquisition by the transferee. There are also provisions for this charge to be reallocated within the Seller group. 3.9 There are similar provisions relating to Stamp Duty but the period of concern is only 3 years: by virtue of Section 42, Finance Act 1930, there is relief from stamp duty for transfers within a 75% group. This relief also applies to intragroup leases by virtue of Section 151, Finance Act 1995. However, under the provisions of Section 111, Finance Act 2002, this group relief is withdrawn if the transferee company leaves the group within 3 years of the date on which the instrument was executed. The transferee is liable to stamp duty as if the interest in land had been transferred at market value. 3.10 Similar relief from SDLT is provided by paragraph 1, Schedule 7, Finance Act 2003, and the degrouping charge arises under paragraph 3 of the same Schedule. This would therefore bring the transfer of the property from Stowupland Properties Limited into Botesdale Limited into charge. Reconstruction relief and acquisition relief are similarly withdrawn by paragraph 9 of the same Schedule. 3.11 If a company acquires the whole or part of the undertaking of another company (such as within a Section 110 Insolvency Act 1986 reconstruction), the rate of stamp duty is limited to 0.5% by virtue of Section 76, Finance Act 1986. However, if there is a change of control of the recipient company within 3 years of the instrument being executed, then the Section 76 relief is withdrawn and stamp duty at the full rate is payable by virtue of Section 113, Finance Act 2002. 3.12 there is similar relief from SDLT as provided by paragraphs 7 and 8, Schedule 7, Finance Act 2003, providing for the rate of SDLT to be 0% and 0.5% respectively. If there is a change of control of the recipient company within 3 years of the transaction, then SDLT at the full rate is payable under the provisions of paragraph 9 of that Schedule. 3.13 Concerns over the various degrouping charges are reflected in the drafting of tax covenants. The advisers to the Buyer will always be concerned to ensure that any such tax costs will be within the scope of the covenant given by the Sellers. There is a growing trend of including an additional paragraph, putting the point beyond doubt. We
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