Capital gains—groups of companies

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Capital gains—groups of companies
  • Definition of a group
  • 75% subsidiary
  • Effective 51% subsidiary
  • Meaning of effective 51% subsidiary
  • Policy rationale
  • Principal company
  • Example
  • Membership of more than one group
  • Group continuity
  • More...

Capital gains—groups of companies

This Practice Note is about the rules for establishing whether companies are within the same group for the purposes of corporation tax on chargeable gains.

In many ways a group of companies operates as a single economic unit. This means that from a tax policy perspective it makes sense to treat activities between group members differently from activities between unconnected persons. As a result, groups of companies are recognised in many areas of the tax system, including the rules for taxing a company's capital gains (also known as chargeable gains).

Companies that are treated as a group for the purposes of corporation tax on chargeable gains are referred to in this Practice Note as a capital gains group.

The main benefit for a company of being a member of a capital gains group is that assets can be transferred between group members free of corporation tax on chargeable gains (see Practice Note: Capital gains—intra-group asset transfers). A further advantage is that roll-over relief for business assets is available where the relevant disposal and acquisition are by different members of the group.

The generosity of the rule on intra-group transfers is to some extent counteracted by the capital gains degrouping rules, which can come into play when a company leaves a group holding assets that were transferred to it intra-group within the previous six years.

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