The following Tax guidance note provides comprehensive and up to date legal information covering:
Companies that are members of the same capital gains group may transfer assets between themselves free of corporation tax on chargeable gains (CGT), see Practice Note: Capital gains—intra-group asset transfers.
Anti-avoidance provisions are needed to prevent groups from using these rules to avoid tax when they wish to sell assets that would otherwise incur a large CGT bill. Instead of selling the asset directly, companies would be able to transfer the asset intra-group, probably to a company that had been specially set up for the purpose, and then sell the shares in the new company. This is known as the envelope trick and is described in more detail below.
The provisions that prevent companies from using the envelope trick are known as the degrouping rules and are found in section 179 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992).
The capital gains degrouping rules apply even when no avoidance is intended. There is a risk that the degrouping rules may apply without the relevant companies' knowledge (until after the event). This is particularly so given that the rules can bite up to six years after an intra-group transfer has taken place (see below).
The degrouping provisions therefore represent a challenge for a group's record-keeping practices.
Before the capital gains degrouping rules were introduced, groups were able
**Trials are provided to all LexisPSL and LexisLibrary content, excluding Practice Compliance, Practice Management and Risk and Compliance, subscription packages are tailored to your specific needs. To discuss trialling these LexisPSL services please email customer service via our online form. Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.
To view the latest version of this document and thousands of others like it, sign-in to LexisPSL or register for a free trial.
Existing user? Sign-in
Take a free trial
0330 161 1234
To view our latest legal guidance content,sign-in to Lexis®PSL or register for a free trial.