Policy paper

Statement of Practice D19

Published 1 January 1978

To obtain the benefit of Taxation of Chargeable Gains Act (TCGA) 1992 section 175, the company making the gain during the replacement of business assets by a group of companies must be a member of a group and the company carrying out the complementary transaction must be a member of the same group, as defined by TCGA 1992 section 170(2) when the transaction is carried out.

The Consultative Committee of Accountancy Bodies raised with HM Revenue and Customs (HMRC) the problem of defining the membership of a group of companies for the purpose of replacement of business assets bearing in mind that the replacement acquisition may take place at any time within a period beginning 12 months before and ending 3 years after the disposal (or such longer period as the Commissioners for HMRC may by notice in writing allow).

HMRC take the view that to obtain the benefit of section 175 the company making the gain or the qualifying replacement must be a member of a group and the company carrying out the complementary transaction must be a member of the same group when that transaction is carried out. The concept of ‘same group’ is as defined in TCGA 1992 section 170(10).

Thus, if company A makes a gain at a time when it is a member of the X group of companies then that gain may only be rolled over against an acquisition by company B if at the time of that acquisition company B is a member of the X group.

Therefore, company B need not have been a member of the group at the time that company A made the disposal but must be a member of the group by the time that company B makes its acquisition. Similarly, company A must be a member of the group at the time that it makes its disposal but need not be a member of the group at the time that company B makes the corresponding acquisition.