Part VI Companies, oil, insurance etc.
Chapter I Companies
Transactions within groups
C1C2171AF1Notional transfers within a group.
1
This section applies where—
a
two companies (“A” and “B”) are members of a group of companies; and
b
A disposes of an asset to a person who is not a member of the group (“C”).
2
Subject to subsections (3) and (4) below, A and B may, by notice in writing to an officer of the Board, jointly elect that, for the purposes of corporation tax on chargeable gains—
a
the asset, or any part of it, shall be deemed to have been transferred by A to B immediately before the disposal to C;
b
section 171(1) shall be deemed to have applied to that transfer; F2...
c
the disposal of the asset or part to C shall be deemed to have been made by BF3; and
d
any incidental costs to A of making the actual disposal to C shall be deemed to be incidental costs to B of making the deemed disposal to C.
3
No election may be made under subsection (2) above unless section 171(1) would have applied to an actual transfer of the asset or part from A to B.
F83ZA
In a case where B—
a
is not resident in the United Kingdom, but
b
is carrying on a trade in the United Kingdom through a permanent establishment there,
the asset or part deemed to be transferred to B by A is to be treated for the purposes of subsections (2)(c) and (3) above as having been acquired by B for use by or for the purposes of the permanent establishment; but that shall not be taken to affect the question whether or not the asset or part is situated in the United Kingdom at any time.
F53A
Section 440(3) of the Taxes Act does not cause subsection (3) above to prevent the making of an election in a case where B is an insurance company; and in such a case the asset or part deemed to be transferred to B by A, and by B to C, is to be treated for the purposes of subsections (2)(c) and (3) above as not being part of B’s long-term insurance fund.
“Insurance company” and “long-term insurance fund” have the same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section 431(2) of that Act).
4
5
Any payment by A to B, or by B to A, in pursuance of an agreement between them in connection with the election—
a
shall not be taken into account in computing profits or losses of either company for corporation tax purposes, and
b
shall not for any purposes of the Corporation Tax Acts be regarded as a distribution F7... ,
provided it does not exceed the amount of the chargeable gain or allowable loss that is treated, as a result of the disposal, as accruing to B.