Commentary

D2.305 Definition of a group for capital gains

Corporate tax
Corporate tax | Commentary

D2.305 Definition of a group for capital gains

Corporate tax | Commentary

Group capital gains—Definition of a group

D2.305 Definition of a group for capital gains

A group of companies is defined for the purposes of corporation tax on chargeable gains as:

  1.  

    (a)     a company (the 'principal company of the group'), and

  2.  

    (b)     that company's 75% subsidiaries, as well as the 75% subsidiaries of those subsidiaries (and so on)1, provided the subsidiaries are also effective 51% subsidiaries of the principal company of the group2.

  3.  

    The 75% definition is similar to the rules for group relief but, for group gains purposes, companies need only 75% of the ordinary shares (and not 75% of distributable profits nor 75% of assets on a winding-up).

In contrast to the rules for group relief purposes, a company can only be a member of one capital gains group.

Example 1

A Ltd
75%
B Ltd
75%
C Ltd
75%
D Ltd
75%
E Ltd

For group capital gains purposes, we must look at the A group as A Ltd is the ultimate holding company (the principal company). A Ltd owns 75% of B Ltd and 56.25% (75% × 75%) of C

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