Capital gains degrouping—additional rules
  • Reduction of charge where just and reasonable
  • Sub-groups
  • Reallocation of gain or loss within group
  • Company takeovers
  • Groups with two members
  • Mergers and demergers
  • Effect of a liquidation or winding up

The capital gains degrouping rules apply where, broadly speaking, a company leaves a group holding an asset that was transferred to it by another member of the group within the previous six years. For more information on:TCGA 1992, ss 179(1), 179(3)

  1. the purpose of the degrouping rules

  2. the circumstances in which a degrouping gain or loss will arise

  3. how to calculate a degrouping gain or loss

  4. how the rules apply when a company leaves a group as a result of:

    1. a share disposal

    2. a share for share exchange or reconstruction, or

    3. an event that is not a share disposal, and

  5. how the degrouping rules interact with the substantial shareholdings exemption

see: Capital gains degrouping.

This note looks at some additional rules that apply to the degrouping provisions.

Reduction of charge where just and reasonable

A company that would otherwise suffer a degrouping charge may claim to have the charge reduced by an amount that is just and reasonable.TCGA 1992, s 179ZA(4)

The Capital Gains Manual describes the type of situation in which this rule will apply. Say B Ltd has a subsidiary A Ltd. B Ltd acquired an asset for £100. B Ltd transfers the asset to A Ltd when it is worth £300. B Ltd later sells A Ltd out of the group for its market value at that time. A degrouping gain of (ignoring indexation) £200 would arise under the basic rule for calculating degrouping charges. This charge would operate as an increase to the disposal consideration in B Ltd's corporation tax on chargeable gains (CGT) calculation upon disposing of A Ltd.Capital Gains Manual, CG45430

HMRC's view is that

Popular documents