HMRC provides guidance on degrouping charges - Mazars - United Kingdom
HMRC provides guidance on degrouping charges
HMRC have issued Revenue & Customs Brief 59/08 clarifying their view of when degrouping charges arise under Section 179 TCGA 1992.
Such a charge arises when a company leaves a group still owning a chargeable asset which had been transferred to it by another group company within the previous six years. This clarification has proved necessary following the Court of Appeal decision in the case of Johnston Publishing (North) Ltd v HMRC. One of the ways of avoiding a s179 charge is where the transferee and transferor companies leave the group together (s 179(2)). What was decided in Johnston was the requirement that the transferor and transferee companies must also be ‘associated’ at the time of the original transfer as well – not only when they left the group. This has caused some concern about how widely these provisions may be applied by HMRC. Their guidance is welcome as it limits the situations where degrouping charges will bite to those where the transferor and transferee companies are not part of a sub-group at the time of the original transfer, and of the same sub-group when they leave the group. The fact that other companies are included in a sub-group does not matter, neither does the fact that the identity of the sub-group members may change as a result, say, of a subsidiary being moved elsewhere in the group or the liquidation of a company. Nevertheless, it is very important to appreciate that the decision in Johnston still represents a serious limitation to the application of the ‘get out’ in s179(2), so the impact of any intra-group transfers of chargeable assets always need to be carefully considered from a tax perspective.
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