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HMRC internal manual

Double Taxation Relief Manual

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HM Revenue & Customs
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Non-residents: UK income: Transfer of assets within a group

TCGA92/S171 allows one company in a group to transfer an asset to another company in the same group on a no gain/no loss basis. By virtue of Section 170 a group is confined to companies which are United Kingdom resident. If a non-resident company owns a United Kingdom company directly and the United Kingdom company itself owns another United Kingdom company, then the two United Kingdom companies (but not the non-resident company) will comprise a group for the purposes of Section 171.

However, two United Kingdom companies each of which is directly owned by a non-resident company are not, and do not form part of, a group for the purposes of Section 171. The non- discrimination Article in a double taxation agreement does not require two United Kingdom companies in this position to be regarded as a group for the purposes of Section 171. The companies should be compared not with two United Kingdom companies owned by another United Kingdom company but with two United Kingdom companies owned by a company resident in a third country. Since no United Kingdom subsidiaries of a non-resident company can be a group for the purposes of Section 171 it is not discriminatory to deny group status to two United Kingdom companies owned by a company in the particular country which is a party to the agreement concerned.