Chapter 24 Group Capital Gains Flashcards
24.1 Definition
Companies are in the same capital gains group when one company owns at least 75% of the ordinary shares of another company or two companies are 75% owned by the same parent. The direct relationship must be 75% but the indirect relationship only needs to be above 50%. A company can only be a member of one group gains group.
24.2 Intra-group transfers of assets
Transfers between members of the same gains group are treated as no gain/no loss transfer. This rule applies automatically and is compulsory. The rules apply where:
• The transferring company is UK resident at the time of disposal, or the asset is a chargeable asset in relation to the company immediately before that time, and
• The transferee company is UK resident at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately after that time
24.3 Reallocation of Gains and losses
An election can be made for a gain or a loss arising in one group company to be transferred to another group company. This is to allow the group to utilize capital losses.
24.4 Making the election
The election to treat a gain or loss as accruing to a fellow group company can only be made if the no gain/ no loss transfer rule would apply between the two companies which make the election. It has to be a joint election made in writing within two years of the end of the accounting period of the company which makes the gain or loss. Any payments made between the companies in relation to the notional transfer will be ignored to the extent they do not exceed the chargeable gain or allowable loss accruing.
24.6 Group-wide Rollover Relief
A capital gains group is treated as one unit for rollover relief purposes. If one company makes a disposal while the other purchases a qualifying asset within 1 year prior to the disposal and three years after the disposal, rollover relief can apply. The rules apply to all companies as longas they are UK resident or are trading through a UK permanent establishment. A join claim is required by both companies and mist be made within four years of the later of the end of the accounting period of the disposal or the accounting period in which the new asset is acquired.
The disposal and acquisition of assets by a non-trading company in a group can qualify for rollover relief so long as they are used in the trade of other companies in the group. Rollover relief cannot be claimed for the acquisition of assets from group companies where the no gain/no loss rules apply.
