Finance Act 2002

Degrouping: company ceasing to be member of group by reason of exempt distribution

61 (1) Paragraphs 58 and 60 do not apply in a case where a company ceases to be a member of a group by reason only of an exempt distribution, unless there is a chargeable payment within five years after the making of the exempt distribution.

(2) If within five years after the making of the exempt distribution there is a chargeable payment, all such adjustments as may be required, by way of assessment, amendment of returns or otherwise, may be made within the period of three years after the making of the chargeable payment.

This applies notwithstanding any time limit on the making of an assessment or the amendment of a return.

(3) In this paragraph—

• “exempt distribution” means a distribution that is exempt by virtue of section 213(2) of the Taxes Act 1988; and

• “chargeable payment” has the meaning given in section 214(2) of that Act.

(4) In determining for the purposes of this paragraph whether one company is a 75% subsidiary of another, the other company—

(a) shall be treated as not being the owner of any share capital that it owns directly in a body corporate if a profit on a sale of the shares would be treated as a trading receipt of its trade, and

(b) shall be treated as not being the owner of any share capital that it owns indirectly and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.