Finance Act 2002

Recovery of degrouping charge from another group company or controlling director

68 (1) This paragraph applies where—

(a) a company (“the taxpayer company”) is liable to a degrouping charge,

(b) an amount of corporation tax has been assessed on the company for the relevant accounting period, and

(c) the whole or part of that amount is unpaid at the end of the period of six months after the time when it became payable.

(2) The following persons may be required, by notice under paragraph 69, to pay the amount of corporation tax referable to the degrouping charge or, if less, the amount of the unpaid tax—

(a) if the taxpayer company was a member of a group at the relevant time—

(i) a company that was at that time the principal company of the group, and

(ii) any other company that at any time in the period of twelve months ending with the relevant time was a member of that group and owned the relevant asset or any part of it;

(b) if at the relevant time the taxpayer company is not resident in the United Kingdom but carries on a trade in the United Kingdom through a branch or agency, any person who is, or during the period of twelve months ending with that time was, a controlling director of the taxpayer company or of a company that has, or within that period had, control of the taxpayer company.

(3) For the purposes of this paragraph—

(a) the relevant accounting period is the accounting period in which the degrouping charge falls to be brought into account by the taxpayer company;

(b) the relevant time is—

(i) in a case within paragraph 58, when the taxpayer company ceased to be a member of the group;

(ii) in a case within paragraph 60, when the taxpayer company ceased to satisfy the qualifying condition;

(iii) where there has been an election under paragraph 66 (reallocation of degrouping charge within group), the time that would have been the relevant time under sub-paragraph (i) or (ii) if there had been no such election;

(c) the relevant asset is the asset in respect of which the degrouping charge arises.

(4) The amount of corporation tax referable to a degrouping charge is the difference between—

(a) the tax in fact payable for the relevant accounting period, and

(b) the tax that would have been payable for that period in the absence of the degrouping charge.

(5) References in this paragraph to a degrouping charge are to—

(a) a credit required to be brought into account under paragraph 58(3) or 60(3), or

(b) where there has been an election under paragraph 66 (reallocation of degrouping charge within group), a credit required to be brought into account as a result of the election.

(6) In this paragraph—

• “director”, in relation to a company, has the meaning given by section 168(8) of the Taxes Act 1988 (read with subsection (9) of that section) and includes any person falling within section 417(5) of that Act (read with subsection (6) of that section);

• “controlling director”, in relation to a company, means a director of the company who has control of it (construing control in accordance with section 416 of the Taxes Act 1988); and

• “group” and “principal company” have the meaning that would be given by Part 8 of this Schedule if in that Part for references to 75% subsidiaries there were substituted references to 51% subsidiaries.