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HMRC internal manual

Capital Gains Manual

Migration of companies: postponement of exit charges


The charge on deemed disposals under TCGA92/S185 (CG42370) may be partly or wholly postponed if the following conditions apply immediately after the relevant time

  • assets are situated outside the UK and are used in or for the purposes of a trade carried on outside the UK (`foreign assets’),
  • the chargeable company is a 75 per cent subsidiary of a company which is resident in the UK, the `principal company’,
  • the chargeable company and the principal company elect for postponement within two years of the relevant time.

The ‘relevant time’ is defined by TCGA92/S185 (1) as the time at which the chargeable company ceases to be resident in the UK, see CG42370.

A company is a 75 per cent subsidiary of another company if at least 75 per cent of its ordinary share capital is directly owned by that company, TCGA92/S187 (7). Ordinary share capital has its normal meaning, see CG/App11.

The situation of assets is determined by TCGA92/S275, see CG12400+.

If a company is trading and an asset situated outside the UK is clearly used in or for the purposes of the trade, the asset will usually be used in or for the purposes of a trade carried on outside the UK. It is sufficient that the trade is carried on partly outside the UK. Business International, Transfer Pricing Team will advise if there is any doubt as to where the trade is carried on.

The assets on which the charge may be postponed may conveniently be described as foreign assets of a foreign trade.

The postponement is similar in principle to the postponement of the charge on the occasion of a transfer of assets of an overseas branch to a non-resident in exchange for shares, TCGA92/S140, see CG45660+.

If an election is made, the charge on the deemed disposal of all the foreign assets of the foreign trade (the `relevant assets’) is postponed. The postponed gain is computed by aggregating the chargeable gains and setting off the allowable losses on the relevant assets to arrive at a single chargeable gain, TCGA92/S187 (2).

If the result of the aggregation of gains and losses is a loss, the election has no effect.

See CG42400 for guidance on the recovery of postponed charges, CG42410 for an example illustrating the computation of a postponed charge and CG42420 for an example of the recovery of a postponed charge. With effect from 11 December 2012, the “exit charge payment plan” introduced by Sch3ZB TMA70 may enable the deferment of exit charges including those previously postponed under the provisions of TCGA92/S187. . Full details can be found in CTM34132.