Commentary

D2.333 Group capital gains—How the degrouping charge is taxed

Corporate tax
Corporate tax | Commentary

D2.333 Group capital gains—How the degrouping charge is taxed

Corporate tax | Commentary

D2.333 Group capital gains—How the degrouping charge is taxed

A degrouping charge is triggered if, within six years of an intra-group transfer, the transferee company leaves the group owning the asset (other than as trading stock) which it had acquired through the intra-group transfer1.

For this purpose, a company is also treated as owning an asset if it2:

  1.  

    (a)     is owned by another company which leaves the group at the same time and the two companies would together form a separate group (see D2.331)

  2.  

    (b)     is property to which a chargeable gain has been rolled over on a replacement of business assets (see C3.302B); or

  3.  

    (c)     derives wholly or partly from the asset acquired on a no gain/no loss transaction; in particular, where the asset acquired is a lease and the company subsequently acquires the freehold reversion3

Where these provisions apply, the transferee company is treated as having sold and immediately reacquired the asset at market value immediately after its actual acquisition4.

The gain so calculated is treated differently depending upon whether or not the company left the group as a result of a disposal of its shares, as follows:

  1.  

    (1)     where the company leaves the group as a result of a disposal of its shares, the disposal consideration received by the company making the disposal is

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