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Mergers within TCGA 1992, s 181 typically arise in joint ventures between large groups.

A common mechanism to form a joint venture is:

1. Ìý

   •ÌýÌýÌýÌý each of the groups sets up a new subsidiary and hives down the appropriate assets (usually in return for an issue of shares, to generate base cost)

2. Ìý

   •ÌýÌýÌýÌý one of the groups will set up the joint venture company

3. Ìý

   •ÌýÌýÌýÌý the new subsidiaries are hived down under the joint venture company by way of a share-for-share exchange

We now have a jointly held joint venture group but, from a tax perspective, the new subsidiaries have left their respective groups holding assets that have been transferred to them within the last six years, which can trigger degrouping charges for capital gains purposes¹. Similarly, degrouping charges can arise in relation to intangible fixed assets². An equivalent relief to section 181 exists to cover the intangible degrouping charge³.

Section 181 is specifically designed to facilitate the formation of commercial joint ventures, by providing an exemption