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HMRC internal manual

Capital Gains Manual

The degrouping charge: HMRC Technical Note on election to apply amended rules from 1 April 2011 instead of 19 July 2011

Paragraph 9(4) to (8) of Schedule 10 Finance (No 3) Act 2011

Technical note

This note outlines the procedure by which a group can opt for the earlier commencement date than 19 July 2011, the date of Royal Assent for Finance Act 2011.

The earlier commencement date will apply where the principal company of the capital gains group makes an election.

The election must be made to an officer of HMRC and may be made until 31 March 2012. It is not necessary to make the election as part of a corporation tax return.

The election will mean that the new rules will apply to all members of the group from 1 April 2011 in respect of their leaving the group that has made the election. That is, if a company leaves the group and then leaves another group before the 19 July 2011, and that second group has not made an election, the revised rules will not apply when the company leaves the second group.

The election may be revoked but this must be done by 31 March 2012. An election that has been revoked will have no effect so that the new rules will apply only to companies that leave the group on or after 19 July 2011.

Because an election can be made after a company has left a group, it must be made, or revoked, with the consent of any company that has left before 19 July 2011.

Elections and notices must be made in writing. There is no prescribed form for an election or notice of consent. The election need not list the group companies. Whilst notices of consent should be submitted with the election they need not be completed at the same time and a notice may relate to a number of companies that leave.