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companies and Capital Gains De-grouping Charge

31 January 2011

HM Revenue & Customs have issued draft guidance and a summary of their consultation process on various capital gains changes to be introduced in Finance Bill 2011. This follows their original announcements before Christmas, and they have invited further comments by 22 February 2011. One of these measures changes where the liability for a capital gains de-grouping charge will sit. After the change, the de-grouping charge will sit with the seller company, rather than in the company which is leaving the group. This is an important point to note when planning a corporate sale out of a group.

A knock on effect which could help the tax position of a group when selling a subsidiary, is that if the disposal of the shares in the subsidiary qualifies for substantial shareholding exemption (“SSE”), then following this change any de-grouping charge may also qualify for SSE.

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