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HMRC internal manual

Guidance on Real Estate Investment Trusts

Capital gains: reallocation within a group of gain or loss on de-grouping (sections 179A and 179B TCGA)

Although there are no special rules changing the way in which sections 179A and 179B TCGA operate where a UK-REIT is involved, the way in which the rules operate is affected by section 601 CTA 2010, which deems the group as far as it carries on a property rental business to be a separate group from the group as far as it carries on residual business, the group pre entry and the group post cessation for the purposes of section 179A and 179B.

Sections 179A and 179B TCGA allow a de-grouping charge to be treated as arising to a company other than the chargeable company provided both companies were members of the relevant capital gains group at the time the charge accrued. The effect of making an election under section 179A is that any deemed chargeable gain or allowable loss is treated as arising to the other company, who will then be able to offset its allowable losses against any deemed chargeable gain or use any deemed allowable loss to cover its chargeable gains. For more details on the application of de-grouping rules and elections, see CG45300 onwards and CG45400onwards.

The effect of section 601 CTA 2010 is to prevent a Group REIT trying to avoid tax on a de-grouping gain that accrues in the residual business by moving that gain into the property rental business. It also prevents a Group REIT trying to utilise a de-grouping loss that accrues in the property rental business by moving it into the residual business within the group.