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YC 12: Public unit trusts
or “Rules for treating ownership in public unit trusts”
You could also call this:

“Rules for splitting a company into two separate entities”

This section explains what happens when a company is split into two companies. Here’s what you need to know:

When a company (called the original parent) gives its shareholders shares in another company (called the spun-out company), some special rules apply. These rules are about who owns the companies and how much of them they own.

The original parent must own more than half of the spun-out company before the split. After the split, the spun-out company takes over the original parent’s ownership of another company (called the spun-out subsidiary).

The law treats the shareholders of the spun-out company as if they were one person. This is to make it easier to keep track of who owns what.

The law also pretends that the spun-out company owned part of the spun-out subsidiary even before it was created. This helps with tax rules about company ownership over time.

There are special ways to calculate how much of each company people own. These calculations look at voting rights and sometimes the value of the shares.

These rules help make sure that when a company splits, the ownership and control of the companies involved are clear for tax purposes.

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Next up: YC 14: Disregarding concessionary rules

or “When special rules help a company meet continuity requirements”
Next

Part Y Definitions and related matters
Measurement of company ownership

YC 13Corporate spin-outs

  1. This section applies if—

  2. a share in a company (the spun-out company) is transferred or issued to a shareholder in another company (the original parent); and
    1. before the transfer or issue, the original parent is treated, under section YC 11(3), as holding a voting interest or market value interest (the spun-out subsidiary interest) in another company (the spun-out subsidiary); and
      1. before the transfer or issue, the original parent is treated as holding an interest in the spun-out company that is a voting interest of more than 50% or, if a market value circumstance exists, a market value interest of more than 50%, both calculated as if section YC 4 did not apply to treat the original parent's interests in the spun-out company as being held by others; and
        1. at the time of the transfer or issue, the original parent is a limited attribution company; and
          1. after the transfer or issue, the interest in the spun-out company is treated under section YC 10 as being held by a notional single person; and
            1. after the transfer or issue, the spun-out company is treated under section YC 11(3) as holding the spun-out subsidiary interest; and
              1. after the transfer or issue, the spun-out company is, at all times during the relevant period described in subsection (3), a limited attribution company.

                1. For the purposes of applying the continuity provisions to the ownership of the spun-out company from the date of the transfer or issue, if the original parent is treated, in the absence of this subsection, as holding an interest in the spun-out company (the spun-out company interest) for a period (the preceding ownership period) ending with the transfer or issue, the notional single person referred to in subsection (1)(db) is treated as holding the spun-out company interest—

                2. during the preceding ownership period; and
                  1. to the extent to which, immediately after the transfer or issue, a group of persons exists who hold common interests in the original parent and the spun-out company, calculated on the assumption that the only voting interests and market value interests in those companies are those treated as held by a notional single person under section YC 10.

                    1. Section YC 4 is overridden and the spun-out company is treated as holding the spun-out subsidiary interest—

                    2. for the period before the transfer or issue that the original parent was treated as holding the spun-out subsidiary interest; and
                      1. for the purposes of applying the continuity provisions from the date of the transfer or issue; and
                        1. to the extent to which, immediately after the transfer or issue, a group of persons exists who hold common interests in the original parent and the spun-out company, calculated on the assumption that the only voting interests and market value interests in those companies are those treated as held by those companies under section YC 11(3).

                          1. In subsection (1)(f), relevant period means—

                          2. in relation to the offset of a loss under Part I (Treatment of tax losses), the period from the date of the transfer or issue until the last day of the period in which the loss is offset:
                            1. in relation to a credit subject to a continuity provision, the period from the date of the transfer or issue until the date the credit is cancelled by a subsequent debit.

                              1. In subsection (2)(c), common interest means—

                              2. if a market value circumstance does not exist for the original parent or the spun-out company, the common voting interest described in subsection (5):
                                1. if a market value circumstance exists for the original parent but not the spun-out company, the lower of—
                                  1. the common voting interest described in subsection (5); and
                                    1. the market value interest in the original parent:
                                    2. if a market value circumstance exists for the spun-out company but not the original parent, the lower of—
                                      1. the common voting interest described in subsection (5); and
                                        1. the market value interest in the spun-out company:
                                        2. if a market value circumstance exists for the original parent and the spun-out company, the lower of the common voting interest described in subsection (5) and the common market value interest described in subsection (6).

                                          1. In subsection (4), common voting interest, for a person in relation to the original parent and the spun-out company, means—

                                          2. the percentage voting interest of the person in each company, if the percentages are the same:
                                            1. the lower of the percentage voting interests of the person in the companies, if the percentages differ.

                                              1. In subsection (4), common market value interest, for a person in relation to the original parent and the spun-out company, means—

                                              2. the percentage market value interest of the person in each company, if the percentages are the same:
                                                1. the lower of the percentage market value interests of the person in the companies, if the percentages differ.

                                                  1. For the purposes of measuring common interests, neither section YB 21 (Transparency of nominees) nor YC 4 apply to treat a nominee’s or company’s voting interest or market value interest in the original parent or the spun-out company to be held by another person, if the interest the other person would be treated as holding would be less than 10%.

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                                                  Notes
                                                  • Section YC 13(1)(b): amended (with effect on 8 September 2021), on , by section 173(1) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                  • Section YC 13(1)(c): substituted (with effect on 1 May 2011), on , by section 132 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                                  • Section YC 13(1)(db): inserted (with effect on 8 September 2021), on , by section 173(2) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                  • Section YC 13(1)(e): amended (with effect on 8 September 2021), on , by section 173(3) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                  • Section YC 13(1B) heading: inserted (with effect on 8 September 2021), on , by section 173(4) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                  • Section YC 13(1B): inserted (with effect on 8 September 2021), on , by section 173(4) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                  • Section YC 13(2) heading: replaced (with effect on 8 September 2021), on , by section 173(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                  • Section YC 13(2): amended (with effect on 8 September 2021), on , by section 173(6) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                  • Section YC 13(2)(a): amended (with effect on 8 September 2021), on , by section 173(7) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).