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CLAUSE 75 - NOTIONAL TRANSFERS WITHIN A GROUP

SUMMARY

This Clause  enhances the notional transfer provision for groups of companies introduced in Finance Act 2000.  It ensures that a group gets full relief for incidental costs of disposal even though, as a result of an election under that provision, the company that bears those costs is a different one from the company that is treated as making the disposal for capital gains purposes. Additionally, the clause aligns the time limit for making an notional transfer election with other election time limits under the corporation tax self assessment regime.

DETAILS OF THE CLAUSE

1.      Subsection (1) treats section 171A TCGA 1992, which has effect for disposals after 31 March 2000, as having been enacted with the amendments now made.

2.      Subsection(2) introduces a new section 171A(2)(d). This deems any incidental costs of the company that makes the disposal to be the costs of the company deemed to make the disposal. 

3.      Subsection (3) amends section 171A(4) so that an election can be made on or before the second anniversary of the end of the accounting period in which the disposal is made. This brings the election time limit into line with other corporation tax time limits.

BACKGROUND NOTE

4.      Prior to the introduction of the legislation in Finance Act 2000 companies had to transfer an asset within the group before disposing of it in order to match gains and losses within the group. The notional transfer legislation in section 171A TCGA 1992 makes it easier for groups of companies to match gains and losses.  The legislation works by enabling an election to treat, for capital gains purposes, a different company as having made the disposal from the company that actually disposed of the asset. 

5.      However, the new legislation is restrictive in the way that the rules governing the deduction of incidental expenses apply.  This clause will ensure that relief is available to the company which is deemed to have disposed of an asset.

6.      The change to the date by which an election must be made aligns the time limit with other Corporation Tax time limits.

7.      The amendments will be deemed to have effect for disposals on or after 1 April 2000, the date from which last year’s changes were effective.