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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Groups: rebasing: group elections out of the kink test: groups of companies

The rebasing legislation includes special rules for elections out of the kink test by groups of companies. If the composition of a group remains unchanged the effects of these rules are very straightforward.

  • Only the principal company of the group can make an election (TCGA92/SCH3/PARA8 (1)).
  • The election takes effect as if it were also an election by any other company which is a member of the group (TCGA92/SCH3/PARA8 (2)).
  • Disposals by subsidiary companies are taken into account in determining the first relevant disposal (TCGA92/SCH3/PARA8 (5)).FA2000/SCH29/PARA1 changed the definition of a group of companies by removing the requirement that group members had to be resident in the UK. These changes have effect for determining, for the purposes of TCGA92/SCH3/PARAS8-9, whether a company is a member, or the principal member, of a group on or after 1 April 2000.

FA2000/SCH29/PARA46 provides rules to cover the situation where there was a group under the old rules, which included the restriction to companies resident in the UK, and as a result of the removel of the residence restriction, the companies are now members of a different group. This happens when the principal company of the “old” UK group is itself the subsidiary of a non UK resident company. FA2000/SCH29/PARA46 (2) provides that in these circumstances the old UK group and the new worldwide group are treated as the same group, so that companies will be covered by any elections made in the old UK group before the changes.