D6.711 Liquidation—capital gain implications
Although the beneficial ownership of the assets of a company in liquidation is vested in the insolvency practitioner upon commencement of the liquidation, for the purposes of tax on chargeable gains, the company is not regarded as having disposed of, or deemed to have disposed of, its assets when the liquidation commences. Where the assets of a company are vested in the liquidator1, it is specifically provided that the transactions of the liquidator are to be regarded as the transactions of the company and that transactions between them are to be disregarded2. In this regard TCGA 1992, s 170(11) expressly provides that the mere passing of a winding-up resolution does not cause the distressed company to leave the group for chargeable gains tax purposes. As a result, the mere commencement of an insolvency proceeding does not break up the corporate group for chargeable gains purposes and the assets of the company may still be transferred on a no gain/no loss basis before completion of the winding up3.
Although a charge to tax on chargeable gains does not arise by virtue of the commencement of an insolvency proceeding itself (see above), a latent liability to tax on chargeable gains may arise under the de-grouping provisions4, see Division D2.3. This risk exists by virtue of the fact that the distressed company may cease to exist upon completion of the insolvency proceeding (assuming it is liquidated). Consequently, if the distressed
To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial