Part VI Companies, oil, insurance etc.
Chapter I Companies
Transactions within groups
C1C7C10C11C14C15C16C17C18171 Transfers within a group: general provisions.
C2C3C4C8C9C12F111
Where—
a
a company (“company A”) disposes of an asset to another company (“company B”) at a time when both companies are members of the same group, and
b
the conditions in subsection (1A) below are met,
company A and company B are treated for the purposes of corporation tax on chargeable gains as if the asset were acquired by company B for a consideration of such amount as would secure that neither a gain nor a loss would accrue to company A on the disposal.
1A
The conditions referred to in subsection (1)(b) above are—
a
that company A is resident in the United Kingdom at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately before that time, and
b
that company B is resident in the United Kingdom at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately after that time.
For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section F2710B form part of its chargeable profits for corporation tax purposes.
2
Subsection (1) above shall not apply where the disposal is—
a
a disposal of a debt due from F12company B effected by satisfying the debt or part of it; or
b
a disposal of redeemable shares in a company on the occasion of their redemption; or
c
a disposal by or to an investment trust; or
F8cd
a disposal by or to a qualifying friendly society; or
da
db
a disposal by company A in fulfilment of its obligations under an option granted to company B at a time when those companies were not members of the same group;
F2e
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and the reference in subsection (1) above to F13company A disposing of an asset shall not apply to anything which under section 122 is to be treated as a disposal of an interest in shares in a company in consideration for a capital distribution (as defined in that section) from that company, whether or not involving a reduction of capital.
3
F343A
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4
For the purposes of subsection (1) above, so far as the consideration for the disposal consists of money or money’s worth by way of compensation for any kind of damage or injury to assets, or for the destruction or dissipation of assets or for anything which depreciates or might depreciate an asset, the disposal shall be treated as being to the person who, whether as an insurer or otherwise, ultimately bears the burden of furnishing that consideration.
F95
In subsection (2)(cd) above “qualifying friendly society” means a company which is a qualifying society for the purposes of section 461B of the Taxes Act (incorporated friendly societies entitled to exemption from income tax and corporation tax on certain profits).
F156
Subsection (1) above applies notwithstanding any provision in this Act fixing the amount of the consideration deemed to be received on a disposal or given on an acquisition.
But where it is assumed for any purpose that a member of a group of companies has sold or acquired an asset, it shall be assumed also that it was not a sale or acquisition to which this section applies.
C14C19171AF36 Election to reallocate gain or loss to another member of the group
1
This section applies where—
a
a chargeable gain or an allowable loss accrues to a company (“company A”) in respect of an asset (or would so accrue but for an election under this section),
b
at the time of accrual, company A and another company (“company B”) are members of the same group, and
c
had company A disposed of the asset to company B immediately before the time of accrual, section 171(1) would have applied.
2
In determining for the purposes of subsection (1)(c) whether subsection (1) of section 171 would have applied, it is to be assumed that subsection (1A)(b) of that section read—
b
that, at the time of the disposal, company B is resident in the United Kingdom, or carrying on a trade in the United Kingdom through a permanent establishment there.
3
In this section “the time of accrual” means the time the chargeable gain or allowable loss accrues to company A (or would so accrue but for an election under this section).
4
Companies A and B may make a joint election to transfer the chargeable gain or allowable loss, or such part of it as is specified in the election, from company A to company B.
5
An election under this section must be made—
a
by notice to an officer of Revenue and Customs, and
b
no later than two years after the end of the accounting period of company A in which the time of accrual falls.
6
An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss.
7
This section does not apply in relation to a chargeable gain or allowable loss that accrues by virtue of section 179.
For provision as to the reallocation within a group of gains and losses arising on such a disposal, see section 179A.
8
For the effect of an election under this section, see section 171B.
C19171BF36Election under section 171A: effect
1
This section applies where an election is made under section 171A.
2
The effect of the election is that the chargeable gain or allowable loss, or such amount of it as is specified in the election, is treated as accruing not to company A but to company B.
3
The gain or loss treated as accruing to company B is to be taken to accrue at the time that, had the election not been made, it would have accrued to company A.
4
Where company B is not resident in the United Kingdom, the gain or loss treated as accruing to it is to be taken to accrue in respect of a chargeable asset held by it.
5
For this purpose an asset is a “chargeable asset” in relation to a company at any time if any gain accruing to the company on a disposal of the asset by the company at that time would be a chargeable gain and would by virtue of section 10B form part of its chargeable profits for corporation tax purposes.
6
Any payment made by company A to company B or by company B to company A, in pursuance of an agreement between them in connection with the election—
a
is not to be taken into account in computing profits or losses of either company for corporation tax purposes, and
b
is not for any purposes of the Corporation Tax Acts to be regarded as a distribution,
provided it does not exceed the amount of the chargeable gain or allowable loss that is treated, as a result of the election, as accruing to company B.
C19171CF36Elections under section 171A: insurance companies
1
This section applies where —
a
an election is made under section 171A in relation to a gain or loss, and
b
company B is an insurance company.
2
For the purposes of section 171A(1)(c), section 440(3) of the Taxes Act (disposals of certain assets by and to insurance companies to fall outside the rule in section 171) is to be disregarded.
3
Subsection (2) does not apply if—
a
company A is an insurance company, and
b
the gain or loss arose in respect of the disposal of an asset that, immediately before the disposal, was part of that company's long-term insurance fund.
4
The chargeable gain or allowable loss treated as accruing to company B as a result of the election is to be treated as arising in respect of an asset that is not part of company B's long-term insurance fund.
5
In this section “insurance company” and “long-term insurance fund” have the same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section 431(2) of that Act).
F16172 Transfer of United Kingdom branch or agency.
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C10C11C14F25173 Transfers within a group: trading stock.
1
Where—
a
a company (“company A”) acquires an asset as trading stock of a trade to which this section applies,
b
the acquisition is from a company (“company B”) that at the time of the acquisition is a member of the same group of companies, and
c
the asset did not form part of the trading stock of any such trade carried on by company B,
company A is treated for the purposes of section 161 as having acquired the asset otherwise than as trading stock and immediately appropriated it for the purposes of the trade as trading stock.
2
Where—
a
a company (“company C”) disposes of an asset forming part of the trading stock of a trade to which this section applies carried on by that company,
b
the disposal is to another company (“company D”) that at the time of the disposal is a member of the same group of companies, and
c
the asset is acquired by company D otherwise than as trading stock of any such trade carried on by it,
company C is treated for the purposes of section 161 as having appropriated the asset immediately before the disposal for some purpose other than the purpose of use as trading stock.
3
The trades to which this section applies are—
a
any trade carried on by a company resident in the United Kingdom, and
b
any trade carried on in the United Kingdom through a F28permanent establishment by a company not so resident.
C5C10C11C14174 Disposal or acquisition outside a group.
F191
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F192
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F193
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4
Schedule 2 shall apply in relation to a disposal of an asset by a company which is or has been a member of a group of companies, and which acquired the asset from another member of the group F17in a transfer to which section 171(1) applied, as if all members of the group for the time being were the same person, and as if the acquisition or provision of the asset by the group, so taken as a single person, had been the acquisition or provision of it by the member disposing of it.
F185
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C10C11C14175 Replacement of business assets by members of a group.
1
F211A
The trades to which this section applies are—
a
any trade carried on by a company that is resident in the United Kingdom, and
b
any trade carried on in the United Kingdom through a F29permanent establishment by a company not so resident.
2
Subsection (1) above does not apply where so much of the consideration for the disposal of the old assets as is applied in acquiring the new assets or the interest in them is so applied by a member of the group which is a dual resident investing company F3... and in this subsection “the old assets” and “the new assets” have the same meanings as in section 152.
F12A
Section 152 F5or 153 shall apply where—
a
the disposal is by a company which, at the time of the disposal, is a member of a group of companies,
b
the acquisition is by another company which, at the time of the acquisition, is a member of the same group, and
F22ba
the conditions in subsection (2AA) below are met, and
C6c
the claim is made by both companies,
as if both companies were the same person.
F232AA
The conditions referred to in subsection (2A)(ba) above are—
a
that the company making the disposal is resident in the United Kingdom at the time of the disposal, or the assets are chargeable assets in relation to that company immediately before that time, and
b
that the acquiring company is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets in relation to that company immediately after that time.
For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section F3010B form part of its chargeable profits for corporation tax purposes.
2B
Section 152 F6or 153 shall apply where a company which is a member of a group of companies but is not carrying on a trade—
a
disposes of assets (or an interest in assets) used, and used only, for the purposes of the trade which (in accordance with subsection (1) above) is treated as carried on by the members of the group which carry on a trade, or
b
acquires assets (or an interest in assets) taken into use, and used only, for those purposes,
as if the first company were carrying on that trade.
2C
F7Neither section 152 nor section 153 shall apply if the acquisition of, or of the interest in, the new assets—
a
is made by a company which is a member of a group of companies, and
F243
Section 154(2) applies where the company making the claim is a member of a group of companies—
a
as if all members of the group for the time being carrying on a trade to which this section applies were the same person, and
b
in accordance with subsection (1) above, as if all those trades were the same trade;
so that the gain accrues to the member of the group holding the asset concerned on the occurrence of the event mentioned in section 154(2).
4
Subsection (2) above shall apply where the acquisition took place before 20th March 1990 and the disposal takes place within the period of 12 months beginning with the date of the acquisition or such longer period as the Board may by notice allow with the omission of the words from “or a company" to “the acquisition".