Section 179: Company ceasing to be member of group: post-appointed day cases., Taxation of Chargeable Gains Act 1992

This section applies where—

a company ("company A") acquires an asset from another company ("company B") at a time when company A and company B are members of the same group,

the conditions in subsection (1A) below are met, and

company A ceases to be a member of that group within the period of six years after the time of the acquisition.References in this section to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a member of a group in consequence of another member of the group ceasing to exist.

If shares in a company are transferred as part of the process of the transfer of a business to which section 140A or 140C applies and in consequence of the transfer the company ceases to be a member of a group ("Group 1")—

the company shall not be treated for the purposes of this section as having left Group 1, and

if the transferee is a member of a group ("Group 2") and in consequence of the transfer the company becomes a member of Group 2 it shall be treated, for the purposes of this section, as if Group 1 and Group 2 were the same.

Where, as part of the process of a merger to which section 140E applies, a company which is a member of a group ("Group 1") ceases to exist and in consequence of that cessation—

assets are transferred to the transferee, or

shares in one or more companies which were also members of the group are transferred to the transferee,

a company which has ceased to exist, or the shares in which have been transferred to the transferee, shall not be treated for the purposes of this section as having left Group 1.

If subsection (1B) applies in relation to a company then for the purposes of this section—

the transferee and a company which has ceased to exist in consequence of the merger shall be treated as the same entity, and

if the transferee is a member of a group ("Group 2") following the merger (whether or not as the principal company of the group) a company which was a member of Group 1 and became a member of Group 2 in consequence of the merger shall be treated, for the purposes of this section, as if Group 1 and Group 2 were the same.

In subsections (1B) and (1C), "transferor" and "transferee" have the meaning given by section 140E(9).

Where two companies cease to be members of the group at the same time, subsection (1) does not have effect as respects the acquisition of an asset by one of the companies from the other if condition A or B is met.

Condition A is that the companies—

are both 75 per cent subsidiaries and effective 51 per cent subsidiaries of another company on the date of the acquisition, and

remain both 75 per cent subsidiaries and effective 51 per cent subsidiaries of that other company until immediately after they cease to be members of the group.

Condition B is that one of the companies—

is both a 75 per cent subsidiary and an effective 51 per cent subsidiary of the other on the date of the acquisition, and

remains both a 75 per cent subsidiary and an effective 51 per cent subsidiary of the other until immediately after the companies cease to be members of the group.

Subsection (2AA) applies where—

a company ("company A") acquired an asset from another company ("company B") at a time when both company A and company B were members of the same group ("the first group"),

company A has ceased to be a member of the first group,

subsection (2) above applies in the case of company A's ceasing to be a member of the first group so that subsection (1) above does not have effect as respects the acquisition of that asset,

at the time company A ceases to be a member of the first group there is a connection between that group and the group of companies of which company A becomes a member on leaving the first group (), and"the second group"

subsequently—

company A ceases to be a member of the second group, or

(before sub-paragraph (i) applies) there ceases to be a connection between the two groups.

Where this subsection applies—

in a case within subsection (2A)(d)(ii), for the purposes of this section (other than subsection (2A)) as it applies as respects the acquisition, company A and any associated company are to be treated as having ceased to be members of the second group at the time the connection between the two groups ceases,

subsection (1) has effect in relation to company A's ceasing to be a member of the second group as if it had been the second group of which both companies had been members at the time of the acquisition, and

subsection (2) may operate to prevent subsection (1) applying by virtue of paragraph (b), unless subsection (2AB) applies.

This subsection applies if company A's ceasing to be a member of the first group at the same time as one or more associated companies forms part of arrangements the main purpose, or one of the main purposes, of which is the avoidance of a liability to corporation tax.

For the purposes of subsection (2A) above there is a connection between the first group and the second group at a particular time if, at that time,, the company which is the principal company of that group is under the control of—

the company which is the principal company of the first group or, if that group no longer exists, which was the principal company of that group when company A ceased to be a member of it;

any person or persons who control the company mentioned in paragraph (a) above or who have had it under their control at any time in the period since company A ceased to be a member of the first group; or

any person or persons who have, at any time in that period, had under their control either—

a company which would have been a person falling within paragraph (b) above if it had continued to exist, or

a company which would have been a person falling within this paragraph (whether by reference to a company which would have been a person falling within that paragraph or to a company or series of companies falling within this sub-paragraph).

This section shall not have effect as respects any asset if, before the time when company A ceases to be a member of the group or, as the case may be, the second group, an event has already occurred by virtue of which the company falls by virtue of section 101A(3) to be treated as having sold and immediately reacquired the asset at the time specified in subsection (3) below.

This section shall not have effect as respects any asset if, before the time when company A ceases to be a member of the group or, as the case may be, the second group, an event has already occurred by virtue of which the company falls by virtue of section 101C(3) to be treated as having sold and immediately reacquired the asset at the time specified in subsection (3) below.

If, when company A ceases to be a member of the group, company A, or an associated company also leaving the group, owns, otherwise than as trading stock—

the asset, or

property to which a chargeable gain has been carried forward from the asset on a replacement of business assets,

then, subject to subsection (4) below, company A shall be treated for all the purposes of this Act as if immediately after its acquisition of the asset it had sold, and immediately reacquired, the asset at market value at that time.

Any chargeable gain or allowable loss which would otherwise accrue to company A on the sale referred to in subsection (3) does not so accrue if—

company A ceases to be a member of the group in consequence of—

a disposal of shares in company A or another member of the group made by a member of the group, or

two or more such disposals,

either—

subsection (3B) applies to the disposal or, if there is more than one disposal, to at least one of them, or

sub-paragraph (i) does not apply but had subsection (3B) applied to the disposal or, if there is more than one disposal, to each of them, any gain arising on the disposal or disposals would not have been a chargeable gain by virtue of Schedule 7AC, and

in the absence of this subsection, section 535 of CTA 2010 (UK REITS: exemption of gains) would not apply to the chargeable gain or allowable loss which would accrue to company A on the sale.

For the purposes of subsections (3A) and (3B), the question whether there is a disposal is to be determined ignoring section 127 (share reorganisations etc treated as not involving disposal).

If subsection (3A) applies, any chargeable gain or allowable loss accruing to the transferor company on a group disposal (other than a group disposal to which section 127 applies) is to be calculated—

where a chargeable gain would accrue to company A in the absence of subsection (3A), as if the amount of the consideration for the group disposal were increased by the amount of the gain, and

where an allowable loss would accrue to company A in the absence of subsection (3A), as if an amount equal to the amount of the loss were a sum allowable under section 38 as a deduction in the computation of the gain or loss accruing on the group disposal.

If there is more than one group disposal, the references in subsections (3D) and (3E) to the amount of the gain or loss which would accrue to company A in the absence of subsection (3A) are to be read, in relation to each disposal, as references to—

such proportion of that amount as the transferor companies in relation to the group disposals jointly elect as the appropriate proportion in relation to the disposal in question, or

where no election is made, the proportion of that amount attributable to that disposal if that amount is divided equally between the group disposals.

An election under subsection (3F) must—

specify the appropriate proportion in relation to each group disposal, and

be made, by notice to an officer of Revenue and Customs, no later than 2 years after the end of the first accounting period of a company in which any chargeable gain or allowable loss on a group disposal accrues.

If a group disposal by a company consists of shares of more than one class, then, for the purposes of subsections (3D) and (3E), the company may apportion any increase or deduction to be made between the classes of shares in such manner as it considers appropriate.

Any chargeable gain or allowable loss accruing to company A on the sale referred to in subsection (3) above shall be treated as accruing to company A at whichever is the later of the following, that is to say—

the time immediately after the beginning of the accounting period of that company in which or, as the case may be, at the end of which the company ceases to be a member of the group; and

the time when under subsection (3) above it is treated as having reacquired the asset;

and sections 138 to 142 of CTA 2010 have effect accordingly as if the actual circumstances were as they are treated as having been.

Subsections (6) to (8) apply where—

in the absence of subsection (6), company A would be treated by virtue of subsection (3) as selling an asset at any time, by reason of ceasing to be a member of the group, and

company A ceases to be a member of the group by reason only of the fact that the principal company of that group becomes a member of another group.

Subsection (3) does not apply to treat company A as selling the asset at that time; but if—

within 6 years of that time company A ceases at any time ("the relevant time") to satisfy the following conditions, and

at the relevant time, company A, or a company in the same group as that company, owns otherwise than as trading stock the asset or property to which a chargeable gain has been carried forward from the asset on a replacement of business assets,

company A shall be treated for all the purposes of this Act as if, immediately after its acquisition of the asset, it had sold and immediately reacquired the asset at the value that, at the time of acquisition, was its market value.

Those conditions are—

that company A is a 75 per cent. subsidiary of one or more members of the other group referred to in subsection (5) above, and

that company A is an effective 51 per cent. subsidiary of one or more of those members.

Any chargeable gain or allowable loss which would otherwise accrue to company A on the sale referred to in subsection (6) does not so accrue if—

company A ceases at the relevant time to satisfy the conditions in subsection (7) in consequence of—

a disposal of shares in company A, or another member of the other group mentioned in subsection (5)(b), made by a member of that other group, or

two or more such disposals,

either—

subsection (3B) applies to the disposal or, if there is more than one disposal, to at least one of them, or

in the absence of this subsection, section 535 of CTA 2010 (UK REITS: exemption of gains) would not apply to the chargeable gain or allowable loss which would accrue to company A on the sale.

Where subsection (7A) applies, subsections (3C) to (3H) apply to the calculation of any chargeable gain or allowable loss accruing on a disposal within subsection (7A)(a) to which subsection (3B) applies (a "relevant disposal") with the following modifications—

in subsections (3C) to (3H) for the references to a group disposal substitute references to a relevant disposal, and

in subsections (3C), (3D) and (3E) for the references to subsection (3A) substitute references to subsection (7A).

Any chargeable gain or allowable loss accruing to company A on the sale referred to in subsection (6) is to be treated as accruing immediately before the relevant time.

Where—

by virtue of this section a company is treated as having sold an asset at any time, and

if at that time the company had in fact sold the asset at market value at that time, then, by virtue of section 30 or 31, any allowable loss or chargeable gain accruing on the disposal would have been calculated as if the consideration for the disposal were increased by an amount,

subsections (3) and (6) above shall have effect as if the market value at that time had been that amount greater.

Sections 450 and 451 of CTA 2010 (meaning of control) shall have effect for the purposes of subsection (2B) above as they have effect for the purposes of Part 10 of CTA 2010; but a person carrying on a business of banking shall not for the purposes of that subsection be regarded as having control of any company by reason only of having, or of the consequences of having exercised, any rights of that person in respect of loan capital or debt issued or incurred by the company for money lent by that person to the company in the ordinary course of that business.

For the purposes of this section—

two companies are associated with each other if one is a 75 per cent subsidiary of the other or both are 75 per cent subsidiaries of another company,

a chargeable gain is carried forward from an asset to other property on a replacement of business assets if, by one or more claims under sections 152 to 158, the chargeable gain accruing on a disposal of the asset is reduced, and as a result an amount falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of the other property,

an asset acquired by company A shall be treated as the same as an asset owned at a later time by that company or an associated company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold, and the first asset was a leasehold and the lessee has acquired the reversion.

For the purposes of this section 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 chargeable to corporation tax as a result of section 2B(3) or (4), or

would, but for Schedule 7AC (exemptions for disposals by companies with substantial shareholdings), be within paragraph (a).

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Where under this section company A is to be treated as having disposed of, and reacquired, an asset, all such recomputations of liability in respect of other disposals, and all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the provisions of this section shall be carried out.

Section 179: Company ceasing to be member of group: post-appointed day cases.

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