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FO 15: Financial arrangements: amalgamation other than resident’s restricted amalgamation
or “Rules for financial agreements when companies merge, except for specific resident mergers”
You could also call this:

“Rules for handling special property when companies merge”

When a company joins with another company, some special property called ‘amortising property’ might pass from one to the other. This is treated like the first company sold the property and the second company bought it.

The company that owned the property first doesn’t get any income or lose any money because of this pretend sale.

If all of the property in a group (called a pool) is passed over, the value of the sale is considered to be the adjusted tax value of the whole pool just before the companies joined.

If only some of the property in a pool is passed over, the value of the sale is considered to be either the market value of the property or the adjusted tax value of the pool just before the companies joined, whichever is less.

For property that’s not in a pool, the new company is treated as if it had been allowed the same deductions for wear and tear (depreciation) that the old company would have been allowed.

These rules help to make sure that when companies join together, the tax treatment of their property is fair and consistent.

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Next up: FO 17: Land

or “Rules for land transfers when companies merge or amalgamate”
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Part F Recharacterisation of certain transactions
Amalgamation of companies

FO 16Amortising property

  1. This section applies in an income year in which amortising property belonging to an amalgamating company passes to the amalgamated company on a resident’s restricted amalgamation. The passing of ownership is treated as a disposal of the property by the amalgamating company and an acquisition by the amalgamated company.

  2. The amalgamating company is treated as neither deriving income nor having a deduction under sections EE 24 to EE 53 (which relate to disposals of depreciable property) as a result of the deemed disposal.

  3. If the amortising property forms the whole of a pool of property of the amalgamating company that is depreciated under sections EE 20 to EE 24 (which relate to depreciation under the pool method), the consideration for the disposal and acquisition is taken as the adjusted tax value of the pool immediately before the amalgamation.

  4. If the amortising property forms part of a pool of property of the amalgamating company that is depreciated under sections EE 20 to EE 24, the consideration for the disposal and acquisition is taken as the lesser of—

  5. the market value of the property; or
    1. the adjusted tax value of the pool immediately before the amalgamation.

      1. If the amortising property is other than pool property of the amalgamating company, the amalgamated company is treated as having been allowed the deduction that the amalgamating company would have had for an amount of depreciation loss, or a deduction under any other amortisation provision of this Act, relating to the property.

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      Notes
      • Section FO 16(1B) heading: inserted (with effect on 1 April 2008), on , by section 235(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section FO 16(1B): inserted (with effect on 1 April 2008), on , by section 235(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).