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FO 9: Unexpired portion of prepaid expenditure
or “Unused prepaid expenses can be transferred when companies merge”
You could also call this:

“Property transfer rules when companies combine”

When a company joins with another company, some of its property might become the property of the new, combined company. This is called a resident’s restricted amalgamation. Here’s what happens to that property:

The old company is treated as if it sold the property just before the companies joined. The new company is treated as if it bought the property.

The new company is usually treated as if it bought the property on the same day the old company did. The price is the same as what the old company paid, plus any money spent on getting or improving the property.

If the property is trading stock for both companies, the price is based on its value to the old company at the time they joined.

If the property made money for the old company but won’t for the new company, the price is based on what it’s worth when they join. But this doesn’t apply to some kinds of land sales.

The old company can claim some money back for wear and tear on the property during the year the companies joined.

There are some exceptions to these rules. For example, different rules apply to financial arrangements, property that wears out over time, and land.

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Next up: FO 11: When property passes on amalgamation other than resident’s restricted amalgamation

or “Property transfer rules when companies merge in non-resident restricted amalgamations”
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Part F Recharacterisation of certain transactions
Amalgamation of companies

FO 10When property passes on resident’s restricted amalgamation

  1. This section applies when property belonging to an amalgamating company becomes the property of the amalgamated company on a resident’s restricted amalgamation.

  2. Despite subsection (1), this section—

  3. does not apply to property that is a financial arrangement, see sections FO 12 to FO 15:
    1. is subject to the rules for—
      1. amortising property in section FO 16:
        1. land in section FO 17.

        2. The amalgamating company is treated as having disposed of the property immediately before the amalgamation. The passing of ownership is treated as a disposal of the property by the amalgamating company and an acquisition of the property by the amalgamated company.

        3. Unless subsections (5) or (6) apply, the amalgamated company is treated as having acquired the property on the date on which the amalgamating company acquired it for an amount that is the sum of—

        4. the price paid for the property; and
          1. any expenditure incurred in acquiring or improving the property; and
            1. any expenditure incurred in securing or improving the amalgamating company’s legal rights to the property.

              1. If the property is trading stock for both the amalgamating company and the amalgamated company, the consideration for the disposal and acquisition is taken as the value of the trading stock to the amalgamating company determined under subpart EB (Valuation of trading stock (including dealer’s livestock)) at the time of the amalgamation.

              2. If the property is revenue account property of the amalgamating company but not revenue account property of the amalgamated company, the consideration for the disposal and acquisition is taken as the market value of the property at the time of the amalgamation. But this subsection does not apply to land that is revenue account property merely because of the 2-year bright-line test in section CB 6A or the 10-year rule in any of sections CB 9 to CB 11, and CB 14 (which relate to the disposal of land), in which case section FO 17(3) may apply.

              3. An amalgamating company is allowed a deduction under section DV 15(3) (Amalgamated companies: property passing on resident’s restricted amalgamation) for an amount of depreciation loss for property transferred to the amalgamated company for the period beginning on the first day of the income year of amalgamation and ending on the day before the date of the amalgamation.

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              Notes
              • Section FO 10(4)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
              • Section FO 10(6): amended, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
              • Section FO 10(6): amended (with effect on 1 October 2015 and applying to a person’s disposal of residential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on , by section 16(1) of the Taxation (Bright-line Test for Residential Land) Act 2015 (2015 No 111).