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HMRC internal manual

Capital Gains Manual

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CG groups: transfers by election

From 1 April 2000, it became possible for groups to bring chargeable gains and allowable losses together in the same company without the need to actually transfer assets within the group before a sale to a third party. This result can be achieved by a joint election under TCGA92/S171A.

The legislation gives groups flexibility in planning their disposals, frees them from the costs of the intra-group transactions, and allows them to make elections after the actual sale of the asset, rather than having to arrange the intra-group transfer beforehand.

The provision was adapted for the change in the definition of a group to include non UK resident companies, effective for disposals on or after 16 March 2005.

An election under TCGA1992/S171A cannot be made in respect of a gain or loss that arises as a result of the “degrouping charge” TCGA1992/S179; instead an election may be made under TCGA1992/S179A, see CG45469.

The legislation was changed significantly in Finance Act 2009 for gains or losses accruing on or after the date of Royal Assent to Finance Act 2009 on 21 July 2009 in order to increase the range of gains and losses that may be transferred by an election; in addition, the effect of an election was altered. The effect of an election is that an amount of chargeable gain or allowable loss is treated as accruing in another group company. Under the old legislation the effect was that the disposal was treated as being made by a different company. The changes were set out in FA2009/S31 and schedule 12.

Before the passing of Finance Act 2011 on 19 July 2011 an election under TCGA1992/S171A could not be made in respect of a gain or loss that arises as a result of the “degrouping charge” TCGA1992/S179; instead an election could be made be made under TCGA1992/S179A, see CG45455. The changes made to the degrouping charge in 2011 enabled it to be brought within TCGA1992/S171A. Note that it was possible for a group to elect to apply the changes to degrouping charge rules from 1 April 2011.

FA2013 introduced a capital gains tax charge for disposals on or after 6 April 2013. This new CGT charge applies to a company on the disposal of an interest in residential property on which an ATED (Annual Tax on Enveloped Dwellings) gain or loss arises (see CG73600+). An election cannot be made under TCGA92/S171A in respect gains or losses accruing on such a disposal.

This guidance is set out as follows -

CG45356 Current legislation
   
CG45357 Frequently asked questions regarding elections
CG45358 Legislation applying to gains and losses accruing before 21 July 2009
CG45359 Elections involving non-resident companies; gains and losses accruing
  before 21 July 2009