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HMRC internal manual

Corporate Intangibles Research and Development Manual

Intangible assets: groups: degrouping: principal company becoming member of another group: subsequent restoration of degrouping adjustment

CTA09/PART8/S785 - transferee company ceases to be controlled by member of second group

Conditions triggering restoration of adjustment

As mentioned in CIRD40550, there are occasions when the transferee company can be exposed to a degrouping adjustment when it ceases to be controlled by a member of the enlarged group (as explained in the last sub-paragraph of CIRD40550). The conditions are:

  • the degrouping adjustment would have applied on leaving the first group but for the ‘principal company’ exemption;
  • the transferee company ceases to satisfy the 75% subsidiary and effective 51% subsidiary of a company within the second group within six years of the asset in question having been transferred to it; and
  • at the time at which the transferee company ceased to satisfy the subsidiary tests, the relevant asset is still held either by the transferee company or by another company in the second group.

Computational consequences

If these provisions are met, then:

  • the transferee company is treated as though it had realised and reacquired the asset for its market value, immediately after the asset was transferred to it, and
  • the further computational consequences described in CIRD40520 follow.

The resulting aggregate credit or debit is treated as though it arose immediately prior to the company having ceased to satisfy the 75% and 51% subsidiary test (the second condition above). The rules described in the last sub-paragraph of CIRD40520 determine how the credit or debit is classified in the company’s CT computation.


This secondary degrouping adjustment does not apply in the event of a merger as described in CIRD40580.