Capital gains—groups of companies
Capital gains—groups of companies

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

  • Capital gains—groups of companies
  • Definition of a group
  • 75% subsidiary
  • Effective 51% subsidiary
  • Principal company
  • Example
  • Membership of more than one group
  • Group continuity
  • Joint ventures
  • Liquidation

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: 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. In addition, the pre-entry loss rules are designed to prevent groups from buying companies with pre-existing capital losses in order to shelter their own gains. For a description of both of these sets of rules, see Practice Notes: Capital gains degrouping and Pre-entry capital losses.

Different parts of the tax legislation have