Commentary on Sections Overview Overview Section 410: Other business successions and reorganisations
1156.This section ensures continuity of relief in certain cases where a partnership is incorporated into another of the business entities covered by this Chapter. It is based on ESC A43.
1157.Under each of the sections in the source legislation dealing with investments in (including loans to) qualifying business entities, relief for interest paid is only available for so long as the shares are held in or the loan is made to the original business entity. In the case where the investment is in a partnership, the individual must remain a partner in the partnership in which the investment is made.
1158.It follows that relief strictly ceases to be available if a partnership is incorporated into one of the other types of qualifying business entity or there is a reconstruction in which the individual’s original shares are replaced by shares in a different qualifying business entity. This rule is relaxed by ESC A43 which allows relief to continue if this sort of business succession occurs. This section legislates that part of ESC A43. See Change 75 in Annex 1 and the commentary on section 409.
1159.This section only applies to genuine business successions. It is not considered to apply if an investment in one entity is replaced by another investment within the same entity. An example is the conversion of convertible loan stock into ordinary shares.