229.This Schedule sets out the tax provisions in relation to the transfer of property, rights and liabilities from the Post Office to the Post Office company. The effect of these provisions is to make the transfer tax neutral. They ensure that the Post Office company will not receive any tax advantage as a result of the transfer and equally ensure that the Post Office company does not suffer any disadvantage.
230.The Post Office is currently chargeable to corporation tax, as will the Post Office company. Paragraph 1 enables that, for the purposes of corporation tax, the Post Office company shall be treated as if it were the same person as the Post Office. It will ensure tax neutrality. The Post Office company will avoid charges to corporation tax resulting from the transfer of property, rights and liabilities from the Post Office. It will also allow the Post Office company the same tax reliefs as would have been available to the Post Office.
231.Paragraph 2 covers the treatment of any shares issued under section 63 of the Act. It enables such shares to be treated for the purposes of the Corporation Tax Acts as if they had been issued wholly for consideration of a subscription paid to the Post Office company of an amount equal to the nominal value of the share. Without this provision, shares would be deemed to be issued for no consideration with the consequence the issuing of the shares would be deemed to be a distribution which would attract a tax charge.
232.Paragraph 3 covers the treatment of any securities issued under sections 63 or 74 of the Act. It enables such securities to be treated for the purposes of the Corporation Tax Acts as if they had been issued for consideration of a loan made to the Post Office company of an amount equal to the principal sum payable under the security. If securities were issued for no consideration, interest payments by the company could be considered a distribution and attract a tax charge.
233.Paragraph 4 makes provision for any debt assumed by the Post Office company under Section 74(1) to be treated for the purposes of the Corporation Tax Acts as if it had been assumed wholly in consideration of a loan made to the Post Office company of an amount equal to the principal sum payable under the debt. If the debt were treated as having been assumed for no consideration, interest payments by the company could be considered a distribution and attract a tax charge. It is intended to maintain a position of tax neutrality for the Post Office company during the restructuring of the company’s balance sheet.
234.Paragraph 5 ensures that the existence or exercise of the powers of the Secretary of State under section 62 of the Act does not constitute or create arrangements within the meaning of section 410 of the Income and Corporation Taxes Act 1988. Without this amendment, there is the possibility that the Post Office company and its subsidiaries may not be able to obtain group relief from the time that arrangements are in place to transfer the Post Office subsidiaries to the company.
235.Paragraph 6 makes it clear that nothing in Part IV of the Act and nothing done under it shall be regarded as a scheme or an arrangement for the purposes of section 30 of the Taxation of Chargeable Gains Act 1992. Without this provision, section 30 would confer on the Post Office company a tax free benefit as a result of the transfer of property, rights and liabilities from the Post Office which could give rise to an additional tax liability.
236.Paragraph 7 ensures that the Taxation of Chargeable Gains Act 1992 applies to a disposal by the Post Office company of any assets acquired by the Post Office under Part III of the Post Office Act 1969. In such instances, the acquisition or provision of an asset by the Crown will be deemed to be an acquisition or provision by the Post Office company. This provision gives the Post Office company the capital gains base cost for things such as buildings that will be owned by the Post Office at the time of transfer. Without this provision the Post Office company would not be entitled to the base cost.
237.Paragraph 8 enables that, for the purpose of value added tax, the Post Office company shall be treated as if it were the same person as the Post Office. This paragraph has the same effect for value added tax as paragraph 1 has for corporation tax.
238.Paragraph 9 makes it clear that the transfer of property, rights and liabilities under section 62 of the Act will not give rise to any liability to stamp duty.
239.Amendments to the Value Added Tax Act 1994 as set out in Schedule 8 of the Act are also intended to ensure that the transfer of the property, rights and liabilities of the Post Office to the Post Office company is tax neutral.
Transfer to the Post Office company: Tax