Once a capital gains group exists:
- Any transfers of chargeable assets between group companies take place at no gain, no loss. This is automatic and no election is required.
- An election can be made to transfer the whole or part of a chargeable gain or allowable capital loss of the current accounting period from one group company to another.
- All of the companies in the group are treated as a single company for the purposes of rollover relief.
- In addition, the transfer of intangible fixed assets does not give rise to a tax charge. Instead, the transferee company is treated as having purchased the asset on the day it was acquired by the transferor company at the same cost. This is automatic and no election is required.
Companies resident overseas
Companies resident overseas are included within a capital gains group. However, the advantages available to such groups are restricted to companies resident in the UK or companies resident overseas which have a permanent establishment in the UK. If K Ltd in the Q Ltd group were owned by J Co, a company resident and trading outside the UK, rather than J Ltd, the members of the Q Ltd capital gains group would not change. However, no gain, no loss transfers, and the other advantages of capital gains groups, would only be available between Q Ltd, K Ltd and L Ltd (and between G Ltd, H Ltd and I Ltd as before).
It is vital to be able to identify the members of a group relief group and a capital gains group. It is then necessary to consider the planning opportunities available to the companies concerned. These opportunities are considered in the remaining parts of this article.
Note: Corporation tax issues are considered in two further articles:
- Corporation tax for ATX-UK
- Corporation tax – Group relief for ATX-UK
Written by a member of the ATX-UK examining team
The comments in this article do not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content of this article as the basis of any decision. The authors and the ACCA expressly disclaim all liability to any person in respect of any indirect, incidental, consequential or other damages relating to the use of this article.