Taxes Consolidation Act 1997 section 623

Company ceasing to be member of group

Section 623 imposes a capital gains charge when a company that acquired an asset from another group member leaves the group within 10 years of acquiring the asset.

• Where a company leaves a capital gains group within 10 years of acquiring an asset from another group member, the section 617 no gain/no loss treatment is withdrawn and the asset is deemed to have been sold and reacquired at market value immediately after the original intra-group transfer.
• The section targets avoidance schemes where a company transfers assets with built-in gains to a subsidiary and then sells the shares in that subsidiary to a third party.
• Where two or more associated companies leave the group at the same time, transfers between them are ignored, but distributions paid out of profits derived from intra-group asset transfers are treated as additional consideration for the disposal that caused them to leave the group.
• If the tax assessed on the departing company is not paid within six months, it may be charged to the principal company of the group or the current owner of the asset, with assessments permitted up to 10 years after the company left the group.