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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Domestication

The term `domestication’ describes the case where a company resident in country X and trading through a permanent establishment in country Y transfers the permanent establishment to a company resident in country Y. Outward domestication accordingly means the case where a UK resident company with a permanent establishment in a foreign country transfers the permanent establishment to a non-UK resident company. Inward domestication means the case where a company not resident in the UK transfers its UK permanent establishment to a UK resident company.

There are provisions deferring capital gains charges on outward domestication in TCGA92/S140. There is no an equivalent rule for inward domestication because TCGA92/S171 permits transfers of assets of a UK permanent establishment between group companies at no gain/no loss, see CG45300.

The provisions dealing with outward domestication apply where, following the transfer, the transferor company has at least a 25 per cent interest, in terms of ordinary share capital, in the transferee company. The provisions are accordingly not confined to outward domestication within a worldwide group. See CG45660+ for guidance on outward domestication.

The requirements of TCGA92/S171 are more stringent in this respect, and apply only where the transferor and transferee companies are in the same worldwide group.