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7 1976

CORPORATION TAX ACT, 1976

PART XII

Companies' Capital Gains

Corporation tax attributable to chargeable gains: recovery from shareholder.

126. —(1) This section applies where a person who is connected with a company resident in the State, on or after the 6th day of April, 1976, receives or becomes entitled to receive in respect of shares in the company any capital distribution from the company, other than a capital distribution representing a reduction of capital, and—

(a) the capital so distributed derives from the disposal after the 5th day of April, 1976, of assets in respect of which a chargeable gain accrues to the company; or

(b) the distribution constitutes such a disposal of assets.

(2) If the corporation tax assessed on the company for the accounting period in which the chargeable gain accrues included any amount in respect of chargeable gains, and any of the tax assessed on the company for that period is not paid within six months from the date when it becomes payable by the company, the said person may by an assessment made within two years from that date be assessed and charged (in the name of the company) to an amount of that corporation tax—

(a) not exceeding the amount or value of the capital distribution which that person has received or became entitled to receive; and

(b) not exceeding a proportion equal to that person's share of the capital distribution made by the company of corporation tax on the amount and at the rate charged in respect of that gain in the assessment in which the said tax was charged.

(3) A person paying any amount of tax under this section shall be entitled to recover a sum equal to that amount from the company.

(4) The provisions of this section are without prejudice to any liability of the person receiving or becoming entitled to receive the capital distribution in respect of a chargeable gain accruing to him by reference to the capital distribution as constituting a disposal of an interest in shares in the company.

(5) In this section “capital distribution” has the same meaning as in paragraph 1 (2) of Schedule 2 to the Capital Gains Tax Act, 1975 , and “connected with” shall be construed in accordance with section 157 (connected persons).

Company reconstruction or amalgamation: transfer of assets.

127. —(1) Subject to the provisions of this section, where—

(a) any scheme of reconstruction or amalgamation involves the transfer of the whole or part of a company's business to another company, and

(b) at the time of the transfer both companies are resident in the State, and

(c) the first-mentioned company receives no part of the consideration for the transfer (otherwise than by the other company taking over the whole or part of the liabilities of the business),

then so far as relates to corporation tax on chargeable gains the two companies shall be treated as if any assets included in the transfer were acquired by the one company from the other company for a consideration of such amount as would secure that on the disposal by way of transfer neither a gain nor a loss would accrue to the company making the disposal, and for the purposes of Part II of Schedule 1 to the Capital Gains Tax Act, 1975 (assets held on the 6th day of April, 1974), the acquiring company shall be treated as if the respective acquisitions of the assets by the other company had been the acquiring company's acquisition of them.

(2) This section does not apply in relation to an asset which, until the transfer, formed part of trading stock of a trade carried on by the company making the disposal, or in relation to an asset which is acquired as trading stock for the purposes of a trade carried on by the company acquiring the asset.

(3) In this section—

scheme of reconstruction or amalgamation” means a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies,

trading stock” has the meaning given by section 62 (2) of the Income Tax Act, 1967 .

Interest charged to capital.

128. —Where—

(a) a company incurs expenditure on the construction of any building, structure or works, being expenditure allowable as a deduction under paragraph 3 of Schedule 1 to the Capital Gains Tax Act, 1975 (expenditure: general provisions), in computing a gain accruing to the company on the disposal of the building, structure or work, or of any asset comprising it, and

(b) that expenditure was defrayed out of borrowed money, and

(c) the company charged to capital all or any of the interest on that borrowed money referable to a period or part of a period ending on or before the disposal,

the sums so allowable shall, notwithstanding subparagraph (3) (b) of the said paragraph 3, include the amount of that interest charged to capital.

Groups of companies: definitions.

129. —(1) For the purposes of this section and the following sections of this Part—

(a) references to a company, subject to section 138 (7), apply only to a company, as that expression is limited by subsection (2), which is resident in the State;

(b) a principal company, and all its 75 per cent. subsidiaries form a group, and where a principal company is a member of a group as being itself a 75 per cent. subsidiary that group shall comprise all its 75 per cent. subsidiaries;

(c) “principal company” means a company of which another company is a 75 per cent. subsidiary;

(d) in applying the definition of “75 per cent. subsidiary” in section 156 (subsidiaries) any share capital of a registered industrial and provident society shall be treated as ordinary share capital; and

(e) “group” and “subsidiary” shall be construed with any necessary modifications where applied to a company incorporated under the law of a country outside the State.

(2) For the purposes referred to in subsection (1) references to a company apply only to—

(a) a company within the meaning of the Companies Act, 1963 , and

(b) a company which is constituted under any other Act or a charter or letters patent or (although resident in the State) is formed under the law of a country or territory outside the State, and

(c) a registered industrial and provident society within the meaning of section 218 of the Income Tax Act, 1967 .

(3) For the purposes referred to in subsection (1) a group remains the same group so long as the same company remains the principal company of the group, and if at any time the principal company of a group becomes a 75 per cent. subsidiary of another company the group of which it was the principal company before that time shall be regarded as the same as the group of which that other company, or one of which it is a 75 per cent. subsidiary, is the principal company, and the question whether or not a company has ceased to be a member of a group shall be determined accordingly.

(4) For the purposes referred to in subsection (1) the passing of a resolution or the making of an order, or any other act, for the winding up of a company shall not be regarded as the occasion of that company, or of any 75 per cent. subsidiary of that company, ceasing to be a member of a group of companies.

(5) The following sections of this Part, except in so far as they relate to recovery of tax, shall also have effect in relation to bodies from time to time established by or under any enactment for the carrying on of any industry or part of an industry, or of any undertaking, under national ownership or control as if they were companies within the meaning of those sections, and as if any such bodies charged with related functions and subsidiaries of any of them formed a group, and as if also any two or more such bodies charged at different times with the same or related functions were members of a group:

Provided that this subsection shall have effect subject to any enactment by virtue of which property, rights, liabilities or activities of one such body fall to be treated for corporation tax as those of another.

(6) For the purposes of this Part—

(a) section 35 of the Capital Gains Tax Act, 1975 (close company transferring assets at undervalue), shall not apply where the transfer is a disposal to which section 130 (1) applies;

(b) paragraph 6 of Schedule 1 to the Capital Gains Tax Act, 1975 (part disposals), and all other provisions for apportioning on a part disposal expenditure which is deductible in computing a gain, shall be operated before the operation of, and without regard to,—

(i) section 130 (1),

(ii) any other enactment making an adjustment to secure that neither a gain nor a loss occurs on a disposal;

(c) a “non-resident group” of companies—

(i) in the case of a group, none of the members of which is resident in the State, means that group, and

(ii) in the case of a group, two or more members of which are not resident in the State, means the members which are not resident in the State,

and for the purposes of this paragraph “group” shall be construed in accordance with subsections (1) (without paragraph (a)), (3) and (4).

(7) For the purposes of section 36 of the Capital Gains Tax Act, 1975 (non-resident company)—

(a) sections 130 to 133 shall apply in relation to non-resident companies which are members of a non-resident group of companies, as they apply in relation to companies resident in the State which are members of a group of companies,

(b) sections 135 and 137 shall apply as if for any reference therein to a group of companies there were substituted a reference to a non-resident group of companies, and as if references to companies were references to companies not resident in the State.

Transfers within a group.

130. —(1) Notwithstanding any provision in the Capital Gains Tax Act, 1975 , fixing the amount of the consideration deemed to be received on a disposal or given on an acquisition, where a member of a group of companies disposes of an asset to another member of the group, both members shall, except as provided by subsections (2) and (3), be treated, so far as relates to corporation tax on chargeable gains, as if the asset acquired by the member to whom the disposal is made were acquired for a consideration of such amount as would secure that on the other's disposal neither a gain nor a loss would accrue to that other; but where it is assumed for any purpose that a member of a group of companies has sold or acquired an asset, it shall be assumed also that it was not a sale to or acquisition from another member of the group.

(2) Subsection (1) shall not apply where the disposal is—

(a) a disposal of a debt from a member of a group of companies effected by satisfying the debt or part of it; or

(b) a disposal of redeemable shares in a company on the occasion of their redemption;

and the reference in that subsection to a member of a group of companies disposing of an asset shall not apply to anything which under Schedule 2 to the Capital Gains Tax Act, 1975 , is to be treated as a disposal of an interest in shares in a company in consideration for a capital distribution (as defined in paragraph 1 of the said Schedule) from that company, whether or not involving a reduction of capital.

(3) For the purposes of subsection (1), so far as the consideration for the disposal consists of money or money's worth by way of compensation for any kind of damage or injury to assets, or for the destruction or dissipation of assets or for anything which depreciates or might depreciate an asset, the disposal shall be treated as being to the person who, whether as an insurer or otherwise, ultimately bears the burden of furnishing that consideration.

Transfers within a group: trading stock.

131. —(1) Where a member of a group of companies acquires an asset as trading stock from another member of the group, and the asset did not form part of the trading stock of any trade carried on by the other member, the member acquiring it shall be treated for purposes of paragraph 15 of Schedule 1 to the Capital Gains Tax Act, 1975 (appropriations to and from stock in trade), as having acquired the asset otherwise than as trading stock and immediately appropriated it for the purposes of the trade as trading stock.

(2) Where a member of a group of companies disposes of an asset to another member of the group and the asset formed part of the trading stock of a trade carried on by the member disposing of it but is acquired by the other member otherwise than as trading stock of a trade carried on by it, the member disposing of the asset shall be treated for purposes of the said paragraph 15 as having immediately before the disposal appropriated the asset for some purpose other than the purpose of use as trading stock.

Disposal or acquisition outside a group.

132. —(1) Where a company which is or has been a member of a group of companies disposes of an asset which it acquired from another member of the group at a time when both were members of the group, paragraph 5 of Schedule 1 to the Capital Gains Tax Act, 1975 (restriction of losses by reference to capital allowances), shall apply in relation to any capital allowances made to the other member (so far as not taken into account in relation to a disposal of the asset by that other member), and so on as respects previous transfers of the asset between members of the group (but this shall not be taken as affecting the consideration for which an asset is deemed under section 130 (1) to be acquired).

(2) Part II of Schedule 1 to the Capital Gains Tax Act, 1975 , shall apply in relation to a disposal of an asset by a company which is or has been a member of a group of companies, and which acquired the asset from another member of the group at a time when both were members of the group, as if all members of the group for the time being were the same person, and as if the acquisition or provision of the asset by the group, so taken as a single person, had been the acquisition or provision of it by the member disposing of it.

Replacement of business assets by members of a group.

133. —For the purposes of section 28 of the Capital Gains Tax Act, 1975 (replacement of business assets), all the trades carried on by members of a group of companies shall be treated as a single trade (unless it is a case of one member of the group acquiring, or acquiring the interest in, the new assets from another or disposing of, or of the interest in, the old assets to another).

Tax on company recoverable from other members of a group.

134. —(1) If at any time a chargeable gain accrues to a company which at that time is a member of a group of companies and any of the corporation tax assessed on the company for the accounting period in which the chargeable gain accrues is not paid within six months from the date when it becomes payable by the company, then, if the tax so assessed included any amount in respect of chargeable gains—

(a) a company which was at the time when the gain accrued the principal company of the group; and

(b) any other company which in any part of the period of two years ending with that time was a member of the said group of companies and owned the asset disposed of or any part of it, or where that asset is an interest or right in or over another asset, owned either asset or any part of either asset; may at any time within two years from the time when the tax became payable be assessed and charged (in the name of the company to whom the chargeable gain accrued) to an amount of that corporation tax not exceeding corporation tax on the amount and at the rate charged in respect of that gain in the assessment on the company to which the chargeable gain accrued.

(2) A company paying any amount of tax under subsection (1) shall be entitled to recover a sum of that amount—

(a) from the company to which the chargeable gain accrued, or

(b) if that company is not the company which was the principal company of the group at the time when the chargeable gain accrued, from that principal company,

and a company paying any amount under paragraph (b) shall be entitled to recover a sum of that amount from the company to which the chargeable gain accrued, and so far as it is not so recovered, to recover from any company which is for the time being a member of the group and which has while a member of the group owned the asset disposed of or any part of it (or where that asset is an interest or right in or over another asset, owned either asset or any part of it) such proportion of the amount unrecovered as is just having regard to the value of the asset at the time when the asset, or an interest or right in or over it, was disposed of by that company.

Company ceasing to be member of a group.

135. —(1) If a company (in this section called “the chargeable company”) ceases to be a member of a group of companies, this section shall have effect as respects any asset which the chargeable company acquired from another company which was at the time of acquisition a member of that group of companies, but only if the time of acquisition fell—

(a) on or after the 6th day of April, 1974, and

(b) within the period of ten years ending with the time when the company ceases to be a member of the group;

and references in this section to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a member of a group by being wound up or dissolved or in consequence of another member of the group being wound up or dissolved.

(2) Where two or more associated companies cease to be members of the group at the same time, subsection (1) shall not have effect as respects an acquisition by one from another of those associated companies.

(3) If, when the chargeable company ceases to be a member of the group, the chargeable company, or an associated company also leaving the group, owns, otherwise than as trading stock—

(a) the asset, or

(b) property on the acquisition of which a chargeable gain in relation to the asset has been deferred on a replacement of business assets,

the chargeable company shall be treated for all the purposes of the Capital Gains Tax Act, 1975 , as if immediately after its acquisition of the asset it had sold, and immediately reacquired, the asset at market value at that time.

(4) For the purposes of this section—

(a) two or more companies are associated companies if, by themselves, they would form a group of companies,

(b) a chargeable gain is deferred on a replacement of business assets if, by one or more claims under section 28 of the Capital Gains Tax Act, 1975 , a chargeable gain on the disposal of those assets is treated as not accruing until the new assets, within the meaning of that section, cease to be used for the purposes of a trade carried on by the company making the claim,

(c) an asset acquired by the chargeable company shall be treated as the same as an asset owned at a later time by that company or an associated company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold, and the first asset was a leasehold and the lessee has acquired the reversion.

(5) If any of the corporation tax assessed on a company in consequence of this section is not paid within six months from the date when it becomes payable then—

(a) a company which on the said date, or immediately after the chargeable company ceased to be a member of the group, was the principal company of the group, and

(b) a company which owned the asset on the said date, or when the chargeable company ceased to be a member of the group,

may at any time within two years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or any part of that tax; and a company paying any amount of tax under this subsection shall be entitled to recover a sum of that amount from the chargeable company.

(6) Notwithstanding any limitation on the time for making assessments, an assessment to corporation tax chargeable in consequence of this section may be made at any time within ten years from the time when the chargeable company ceased to be a member of the group, and where under this section the chargeable company is to be treated as having disposed of and reacquired, an asset, all such recomputations of liability in respect of other disposals, and all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the provisions of this section shall be carried out.

Exemption from charge under section 135 in the case of certain mergers.

136. —(1) Subject to the following provisions of this section, section 135 shall not apply in a case where—

(a) as part of a merger, a company (in this section referred to as “company A”) ceases to be a member of a group of companies (in this section referred to as “the A group”); and

(b) it is shown that the merger was carried out for bona fide commercial reasons and that the avoidance of liability to tax was not the main or one of the main purposes of the merger.

(2) In this section “merger” means an arrangement (which in this section includes a series of arrangements)—

(a) whereby one or more companies (in this section referred to as “the acquiring company” or, as the case may be, “the acquiring companies”) none of which is a member of the A group acquires or acquire, otherwise than with a view to their disposal, one or more interests in the whole or part of the business which, before the arrangement took effect, was carried on by company A; and

(b) whereby one or more members of the A group acquires or acquire, otherwise than with a view to their disposal, one or more interests in the whole or part of the business or each of the businesses which, before the arrangement took effect, was carried on either by the acquiring company or acquiring companies or by a company at least 90 per cent. of the ordinary share capital of which was then beneficially owned by two or more of the acquiring companies; and

(c) in respect of which the conditions in subsection (4) are fulfilled.

(3) For the purposes of subsection (2), a member of a group of companies shall be treated as carrying on as one business the activities of that group.

(4) The conditions referred to in subsection (2) (c) are—

(a) that not less than 25 per cent. by value of each of the interests acquired as mentioned in paragraphs (a) and (b) of subsection (2) consists of a holding of ordinary share capital, and the remainder of the interest, or as the case may be of each of the interests, acquired as mentioned in the said paragraph (b) consists of a holding of share capital (of any description) or debentures or both; and

(b) that the value or, as the case may be, the aggregate value of the interest or interests acquired as mentioned in subsection (2) (a) is substantially the same as the value or, as the case may be, the aggregate value of the interest or interests acquired as mentioned in subsection (2) (b); and

(c) that the consideration for the acquisition of the interest or interests acquired by the acquiring company or acquiring companies as mentioned in subsection (2) (a), disregarding any part of that consideration which is small by comparison with the total, either consists of, or is applied in the acquisition of, or consists partly of and as to the balance is applied in the acquisition of, the interest or interests acquired by members of the A group as mentioned in subsection (2) (b);

and for the purposes of this subsection the value of an interest shall be determined as at the date of its acquisition.

(5) Notwithstanding the provisions of section 129 (1) (a), references in this section to a company include references to a company resident outside the State.

Shares in subsidiary member of a group.

137. —(1) This section has effect if a company (in this section called “the subsidiary”) ceases to be a member of a group of companies, and on an earlier occasion shares in the subsidiary were disposed of by another company (in this section called “the chargeable company”) which was then a member of that group in the course of an amalgamation or reconstruction in the group, but only if that earlier occasion fell—

(a) on or after the 27th day of November, 1975, and

(b) within the period of ten years ending with the date on which the subsidiary ceases to be a member of the group;

and references in this section to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a member of a group by being wound up or dissolved or in consequence of another member of the group being wound up or dissolved.

(2) The chargeable company shall be treated, for all the purposes of the Capital Gains Tax Act, 1975 , as if immediately before the earlier occasion it had sold, and immediately reacquired, the said shares at market value at that time, and for the purposes of this subsection if the earlier occasion fell on or before the 5th day of April, 1976, it shall be deemed to have fallen on the 6th day of April, 1976.

(3) If, before the subsidiary ceases to be a member of the group, the chargeable company has ceased to exist, or a resolution has been passed, or an order made, for the winding up of the company, or any other act has been done for the like purpose, any corporation tax to which, if the chargeable company had continued in existence, it would have been chargeable in consequence of this section may be assessed and charged (in the name of the chargeable company) on the company which is, at the time when the subsidiary ceases to be a member of the group, the principal company of the group.

(4) If any of the corporation tax assessed on a company in consequence of this section, or in pursuance of subsection (3), is not paid within six months from the date when it becomes payable, then—

(a) a company which is on the said date, or was on the earlier occasion, the principal company of the group, and

(b) any company taking an interest in the subsidiary as part of the amalgamation or reconstruction in the group,

may at any time within two years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or any part of that tax; and a company paying any amount of tax under this subsection shall be entitled to recover a sum of that amount from the chargeable company, or as the case may be from the company assessed under subsection (3).

(5) Notwithstanding any limitation on the time for making assessments, an assessment to corporation tax chargeable in consequence of this section may be made at any time within ten years from the time when the subsidiary ceased to be a member of the group and, in relation to any disposal of the property after the earlier occasion, there shall be made all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the provisions of this section.

(6) For the purposes of this section there is a disposal of shares in the course of an amalgamation or reconstruction in a group of companies if paragraph 4 or 5 of Schedule 2 to the Capital Gains Tax Act, 1975 (company amalgamations), applies to shares in a company so as to equate them with shares in or debentures of another company, and the companies are members of the same group, or become members of the same group as a result of the amalgamation or reconstruction.

(7) Where by virtue of paragraph 5 of the said Schedule 2 shares are to be treated as cancelled and replaced by a new issue, references in this section to a disposal of shares include references to the occasion of their being so treated.

Depreciatory transactions in a group.

138. —(1) This section has effect as respects a disposal of shares in, or securities of, a company (in this section referred to as an “ultimate disposal”) if the value of the shares or securities has been materially reduced by a depreciatory transaction effected on or after the 6th day of April, 1974; and for this purpose “depreciatory transaction” means—

(a) any disposal of assets at other than market value by one member of a group of companies to another, or

(b) any other transaction satisfying the conditions of subsection (2):

Provided that a transaction shall not be treated as a depreciatory transaction to the extent that it consists of a payment which is required to be or has been brought into account, for the purposes of corporation tax on chargeable gains, in computing a chargeable gain or allowable loss accruing to the person making the ultimate disposal.

(2) The conditions referred to in subsection (1) (b) are—

(a) that the company, the shares in which, or securities of which, are the subject of the ultimate disposal, or any 75 per cent. subsidiary of that company, was a party to the transaction, and

(b) that the parties to the transaction were or included two or more companies which at the time of the transaction were members of the same group of companies.

(3) Without prejudice to the generality of subsection (1), the cancellation of any shares in or securities of one member of a group of companies under section 72 of the Companies Act, 1963 , shall, to the extent that immediately before the cancellation those shares or securities were the property of another member of the group, be taken to be a transaction fulfilling the conditions in subsection (2).

(4) If the person making the ultimate disposal is, or has at any time been, a member of the group of companies referred to in subsection (1) or (2), any allowable loss accruing on the disposal shall be reduced to such extent as appears to the inspector, or on appeal the Appeal Commissioners, or on a rehearing by a judge of the Circuit Court, that judge, to be just and reasonable having regard to the depreciatory transaction:

Provided that if the person making the ultimate disposal is not a member of the said group when he disposes of the shares or securities, no reduction of the loss shall be made by reference to a depreciatory transaction which took place when that person was not a member of the said group.

(5) The inspector or the Appeal Commissioners or the judge of the Circuit Court shall make the decision under subsection (4) on the footing that the allowable loss ought not to reflect any diminution in the value of the company's assets which was attributable to a depreciatory transaction, but allowance may be made for any other transaction on or after the 6th day of April, 1974, which has enhanced the value of the company's assets and depreciated the value of the assets of any other member of the group.

(6) If, under subsection (4), a reduction is made in an allowable loss, any chargeable gain accruing on a disposal of the shares or securities of any other company which was a party to the depreciatory transaction by reference to which the reduction was made, being a disposal not later than ten years after the depreciatory transaction, shall be reduced to such extent as appears to the inspector, or on appeal to the Appeal Commissioners, or on a rehearing by a judge of the Circuit Court, that judge, to be just and reasonable having regard to the effect of the depreciatory transaction on the value of those shares or securities at the time of their disposal:

Provided that the total amount of any one or more reductions in chargeable gains made by reference to a depreciatory transaction shall not exceed the amount of the reductions in allowable losses made by reference to that depreciatory transaction.

All such adjustments, whether by way of discharge or repayment of tax, or otherwise, as are required to give effect to the provisions of this subsection may be made at any time.

(7) For the purposes of this section—

securities” includes any loan stock or similar security whether secured or unsecured;

references to the disposal of assets include references to any method by which one company which is a member of a group appropriates the goodwill of another member of the group;

a “group of companies” may consist of companies some or all of which are not resident in the State.

(8) References in this section to the disposal of shares or securities include references to the occasion of the making of a claim under section 12 (4) of the Capital Gains Tax Act, 1975 , that the value of shares or securities has become negligible, and references to a person making a disposal shall be construed accordingly.

Dividend stripping.

139. —(1) The provisions of this section apply where one company (in this section referred to as “the first company”) has a holding in another company (in this section referred to as “the second company”) and the following conditions are fulfilled—

(a) that the holding amounts to, or is an ingredient in a holding amounting to, 10 per cent. of all holdings of the same class in the second company,

(b) that the first company is not a dealing company in relation to the holding,

(c) that a distribution is or has been made on or after the 6th day of April, 1974, to the first company in respect of the holding, and

(d) that the effect of the distribution is that the value of the holding is or has been materially reduced.

(2) Where this section applies in relation to a holding section 138 shall apply in relation to any disposal of any shares or securities comprised in the holding, whether the disposal is by the first company or by any other company to which the holding is transferred by a transfer to which section 130 applies, as if the distribution were a depreciatory transaction and, if the companies concerned are not members of a group of companies, as if they were:

Provided that the distribution shall not be treated as a depreciatory transaction to the extent that it consists of a payment which is required to be or has been brought into account, for the purposes of corporation tax on chargeable gains, in computing a chargeable gain or allowable loss accruing to the person making the ultimate disposal.

(3) This section shall be construed together with section 138.

(4) For the purposes of this section a company is “a dealing company” in relation to a holding if a profit on the sale of the holding would be taken into account in computing the company's trading profits.

(5) References in this section to a holding in a company refer to a holding of shares or securities by virtue of which the holder may receive distributions made by the company, but so that—

(a) a company's holdings of different classes in another company shall be treated as separate holdings, and

(b) holdings of shares or securities which differ in the entitlements or obligations they confer or impose shall be regarded as holdings of different classes.

(6) For the purposes of subsection (1)—

(a) all a company's holdings of the same class in another company are to be treated as ingredients constituting a single holding, and

(b) a company's holding of a particular class shall be treated as an ingredient in a holding amounting to 10 per cent. of all holdings of that class if the aggregate of that holding and other holdings of that class held by connected persons amounts to 10 per cent. of all holdings of that class,

and section 157 shall have effect in relation to paragraph (b) as if in subsection (7) of that section after the words “or exercise control of” in each place where they occur there were inserted the words “or to acquire a holding in”.