Mergers Capital Gains Tax Relief: CGTA Section 32A — Repealed, Untouched, Needed?

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ABSTRACT

Mergers Capital Gains Tax Relief: CGTA Section 32A — Repealed, Untouched, Needed?

Professor Gbolahan Elias*

Section 49 of the Finance Act (2019) (“FA 2019”) introduced a new head of capital gains tax relief in mergers and other corporate re-organizations contexts. S. 49 is redolent of older tax relief in income tax contexts. However, there appears still to be some uncertainty  about whether or not the old relief in the contexts in s. 32A of the Capital Gains Tax Act (1993) still applies alongside the new changes. In this paper, the author argues that the two regimes of relief from capital gains tax for mergers and other corporate re-organizations continue to apply side-by-side, and that more heads of relief from the tax would be welcome in the contexts. He analyzes the text, structure, aims and history of the statutory provisions and the example of other jurisdictions in support of his contention.

Keywords: Tax Relief; Mergers and Acquisitions; Capital Gains Tax; Finance Act.

INTRODUCTION
This paper aims to develop two narrower arguments and one broad argument on the Capital Gains Tax Act (1967) (“CGTA”). One of the narrower arguments is that the legacy capital gains tax relief for mergers in section 32 of CGTAis still in force. The other is that at least a variant of section 32 of CGTA should remain in force indefinitely. Readers may recall that 2016 I wrote a fairly elaborate article that discussed aspects of section 32 of CGTA.₁

The vitality of section 32 A is a topical matter because it is frequently ignored in the course of transactions nowadays. Attention tends now to focus on Finance Act (2019) (“FA2019”) s. 49, and on no other statutory provision, wherever the discussion is about relief from capital gains tax when assets get moved from one vehicle to another. This is so even in the course of a formal merger.

This paper’s central contention is that the aims of section 49 of FA2019 and section 32 of CGTA are distinct and separately commendable and should not be confused or conflated. Each aim is compelling in its own right and addresses a different core need. Each of the two provisions is warranted and should continue to exist.

The broader aim of the paper is to show and argue that it makes sense to add to the categories of capital gains tax relief in corporate re-organisation contexts. Conceptual considerations, practical concerns and the experience of other jurisdictions all point to this broader conclusion.

The paper is laid out in three PARTS that add to this first, introductory PART. The first of the three PARTS compares section 49 of FA 2019 with section 29(9) Companies Income Tax Act (1979).

* SAN MA BCL D.Phil. (all three Oxon.). Fellow of the Chartered Institute of Taxation. Partner at G. Elias. Visiting Professor at Babcock University, Nigeria.

1. Company Mergers and Land Transfer Taxes, (2011) (1)4 The Appellate Review 49.

THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW Vol.14 No.2