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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Groups: transfers by election involving a non-resident company; gains and losses accruing before 21 July 2009

An election for the deemed transfer of an asset from a non-resident group company carrying on a business in the UK through a permanent establishment there to a UK resident company is possible for disposals made after 31 March 2000 subject to the requirements of TCGA92/S171A being met.

For disposals before 16 March 2005, an election under TCGA92/S171A (2) would not be possible where the deemed transfer was to a non UK resident group company carrying on a trade in the UK through a permanent establishment here. That is because the asset could not be said to have been acquired by the transferee for use by or for the purposes of its permanent establishment. The asset would not meet the requirements of TCGA92/S171 (1A)(b) because it would not be a chargeable asset of that company immediately after the transfer. It is a condition of TCGA92/S171A (3) that TCGA92/S171 (1) would have applied in the case of an actual transfer of the asset between the parties in question immediately before the disposal.

For disposals made on or after 16 March 2005, TCGA92/S171A (3ZA) provides that the transferee company will be treated, for the purposes of determining whether the conditions for an election under TCGA92/S171A (2) to be made are met, as acquiring the asset for use by or for the purposes of its UK permanent establishment. An election can therefore be made on the basis that this treatment applies, subject to the requirements of TCGA92/S171A being met.

An election made in these circumstances does not affect the question of whether or not the asset concerned is situated in the UK at any time.