Chapter 25 Group Gains – further aspects Flashcards
25.1 Companies leaving a group
If a company leaves a group within six years of an intra-group transfer still owning the asset, a gain or loss will be assessed on the company that is selling the shares. The charge is calculated as though the asset that was transferred has been sold for its open market value of the original transfer, this is known as a degrouping charge.
The charge is taxed on the company selling the shares, if it is a gain the charge is added to the consideration for share disposal, if it is a loss it is treated as an allowable cost in the calculation of the share disposal. The charge can be reallocated to another group member.
25.2 Intangible fixed assets within a group
A transfer of an IFA within a group is not treated as a disposal by the transferor, or an acquisition of the transferee. The transferee is treated as acquiring the IFA on the same date for the same cost as the transferor had. If the transferee leaves the group within 6 years a degrouping charge applies. There is a deemed disposal and reacquisition of the asset which takes place at market value at the date of transfer.
A degrouping charge can be rollover over or relocated to a member of the group that the transferee is leaving. IFA rollover relief is available on a group wide basis provided the company that buys the asset is within the same group at the time of the IFA purchase as the company that made the IFA income gain.
If the sale of shares qualifies for the SSE and these conditions are met no degrouping charge applies:
• Transferee leaves the gains group within six years of the tax neutral transfer, still holding the IFA, and
• The SSE applies, and
• The transferee company leaves the group on or after 7 November 2018
25.4 Use of realized Pre-entry capital losses
Realized pre-entry losses are losses on assets which have been sold prior to the company joining a new group. There is a restriction on their use after the company has joined the group, there is no restriction on unrealized losses however. Realized pre-entry losses can only be set against:
• Gains on assets held at the time the company joined the group, or
• Gains on assets bought by the company or another group company after joining the group from a non-group company, which are used in trade at the time it joined the group and which any company continued to carry on until disposal of the asset
