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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Groups: rebasing: elections out of kink test: takeover

If P acquires T before the relevant time for the P group there are three main possibilities.

Example 1: election previously made by tIf an election made by T already covers all the companies in the T group, none of the T group companies is an incoming company in relation to the P group. TCGA92/SCH3/PARA9 (1)(b) would not apply to make the acquisition of the T group the relevant time for the P group. All the T group companies would remain covered by the election by T. Company P has the right to make its own election at any time before 6 April 1990, or after the first disposal to which Section 35 applies by a member of the P group (taking account of the rules for outgoing and incoming companies).

Example 2: Takeover after relevant time of target group but before election made for target groupA member of the T group, say T1, has made a disposal to which Section 35 applies before the acquisition by P, but T has not made an election and the time limit for making an election has not expired.

T1 is an incoming company in relation to the P group. The acquisition of T1 establishes the relevant time of the P group under TCGA92/SCH3/PARA9 (1)(b). The disposal by T1 is now the first relevant disposal of the P group under TCGA92/SCH3/PARA8 (5)(b).

The right to make the election passes from T to P. The effect of TCGA92/SCH3/PARA8 (2) is that any election by P will cover all the companies in the P/T group, because all these companies are members of the enlarged group at the relevant time.

Example 3: Takeover before relevant time of target groupNo company in the T group has made a disposal to which Section 35 applies before the acquisition by P. The result is that no company in the T group is an incoming company in relation to the P group, and the takeover does not establish the relevant time of the P group. Following a disposal by any member of the enlarged P/T group, P alone has the right to make an election. The election will cover all companies which are members of the P/T group at the relevant time.