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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Groups: appropriations from trading stock

TCGA92/S173 (2)

The reverse situation to that described at CG45905 is where a group member, which holds an asset as trading stock, disposes of the asset to another group member which does not hold the asset as trading stock. In this case TCGA92/S173 (2) treats the transferor as having, immediately before the disposal, appropriated the asset for some purpose other than use as trading stock. For capital gains purposes, TCGA92/S161 (2) provides that the transferor acquires the asset for the amount included as a receipt in computing the transferor’s trading income, see BIM33610. The no gain/no loss rule then operates on the intra-group transfer in the usual way, so the transferee takes over the deemed capital gains acquisition cost of the transferor.

TCGA92/S173 only applies if the trade for which the asset is acquired as trading stock is carried on by a UK resident company or is carried on by a non-resident company through a UK permanent establishment. If the trade does not satisfy either of these conditions, the disposal and acquisition of the asset will not be a no gain/no loss disposal and a gain or loss will arise to the disposing company based on a sale at market value.