Commentary

D2.325 Group capital gains—computational rules for transactions outside the group

Corporate tax
Corporate tax | Commentary

D2.325 Group capital gains—computational rules for transactions outside the group

Corporate tax | Commentary

Group capital gains—Transactions outside the group

D2.325 Group capital gains—computational rules for transactions outside the group

On the disposal of an asset outside the group that has been the subject of an intra-group transfer, the allowable expenditure of the transferee company is the acquisition cost as calculated at the date of the intra-group transfer (D2.311). Its gain or loss is then calculated in the usual manner, although special provisions apply when a loss accrues on a disposal as a result of indexation (see below and D2.327).

Example 1

A Ltd, B Ltd and C Ltd are all members of the same group. On 1 March Year 1 A Ltd purchased land for £200,000 and on 1 July Year 1 transferred it to B Ltd. On 1 October Year 2 B Ltd transferred the land to C Ltd, and on 1 February Year 5 C Ltd sold the land outside the group for £300,000.

The deemed consideration for the transfer on 1 July Year 1 is:

Cost to A Ltd£200,000
If Year 1 is 2017 or earlier, Add: Indexation (March – July Year 1) – for example:2,400
£202,400

The deemed consideration for the transfer on 1 October Year 2 is:

Cost to B Ltd£202,400
If Year 1 is 2016 or earlier, Add: Indexation (July Year 1 – October Year 2) – for example:
(If Year 1 is 2017, Indexation (July Year 1 – December, Year 1) will be

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