Impact of share sales on tax groupings
Impact of share sales on tax groupings

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

  • Impact of share sales on tax groupings
  • Group and consortium relief
  • Capital gains groups—intra-group asset transfers
  • Capital gains groups—value shifting and depreciatory transactions
  • Capital gains groups—pre-entry losses and gains
  • Loan relationships
  • Derivative contracts
  • Intangible fixed assets
  • Stamp duty and stamp duty reserve tax
  • Land transaction taxes (stamp duty land tax (SDLT), land and buildings transaction tax (LBTT) and land transaction tax (LTT))
  • More...

Companies can be treated as forming groups for many different tax purposes. The usual principle behind group treatment is that the companies which form the group represent an economic whole and so should be treated, for example, as carrying on the same business, making the same supplies and owning the same assets.

As a result, tax groupings generally benefit from a number of special regimes which are broadly designed to ensure that the overall impact of taxation on the group as a whole reflects its economic unity.

Where a company is sold by another company when, prior to the sale, the two companies form a group for any tax purposes, the economic unity is clearly broken and the special rules applying to groups will cease to apply. This has obvious consequences for both the seller and the target company after the sale completes since they will be taxed individually or as part of new of revised groupings.

The sale transaction can, however, also have an impact on the taxation of certain pre-completion transactions. The availability of certain reliefs will only be available whilst a tax grouping remains intact and, in some circumstances, can be withdrawn where that grouping ceases within a certain period of time.

Group and consortium relief

Group relief can only be used to surrender current year losses. In addition, the surrendering company can only surrender losses

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