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Companies leaving a group

Assets are transferred between group companies on a no gain / no loss basis, as explained in the Group gains guidance note. However, if a company leaves the group within six years of an intra-group transfer of an asset, whilst still owning the transferred asset, a ‘degrouping’ or ‘exit’ charge will arise. The company is treated as if it had sold and immediately reacquired the asset at market value at the time of the original transfer. Any chargeable gain or allowable loss accruing to the company shall arise on the later of the accounting period during which the company leaves the group and the time of the original transfer.

The rules regarding the computation of company chargeable gains apply equally when calculating the degrouping gain or loss.

Any reliefs or exemptions from corporation tax that might apply to the group disposal will also apply to the degrouping element of the consideration. For example, if the substantial shareholdings exemption applies to the disposal of shares, it will also apply to exempt the degrouping element of the gain.

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