(b) it does not matter whether the tax advantage is obtained for
the disposing company or any other person.

(4) In relation to a case in which the disposal of the shares or securities
precedes their acquisition, the reference in subsection (1)(a) to a
5reduction is to be read as including a reference to an increase.

(5) Where, but for arrangements to which subsection (6) applies, a
transaction would, by virtue of section 29(2), be treated as a disposal
of shares by a company, that transaction is to be treated as if it were,
by virtue of section 29(2), a disposal of those shares.

(6) 10The arrangements to which this subsection applies are
arrangements—

(a) whereby the value of the shares or securities is materially
reduced, and

(b) the main purpose, or one of the main purposes, of which is to
15obtain a tax advantage (whether for the company or any
other person).

(7) In this section—

• “arrangements” includes any agreement, understanding,
  scheme, transaction or series of transactions (whether or not
  20legally enforceable);

• “exempt distribution” means a distribution which—

  (a)

  for the purposes of section 931D of CTA 2009
  (exemption from charge to tax: distributions received
  by companies that are not small), falls within an
  25exempt class by virtue of section 931H of that Act
  (dividends derived from transactions not designed to
  reduce tax), or

  (b)

  would be within paragraph (a) but for the recipient
  being a small company (within the meaning of section
  30931S of that Act) in the accounting period of the
  recipient in which the distribution was received;

• “group” is to be construed in accordance with section 170;

• “securities” has the same meaning as in section 132;

• “tax advantage” means the avoidance of a liability to
  35corporation tax in respect of chargeable gains.”

3 In section 176 of TCGA 1992 (depreciatory transactions within a group), in
subsection (1), for “on or after 31st March 1982” substitute “within the period
of 6 years ending with the disposal”.

4 In section 179 of TCGA 1992 (company ceasing to be member of group), in
40subsection (9)(b), after “section 30” insert “or 31”.

Consequential repeals

5 The following provisions are repealed—

(a) in Schedule 20 to FA 1996, paragraph 47(b) and (c),

(b) Schedule 9 to FA 1999,

(c) 45in Schedule 29 to FA 2000, paragraph 17,

(d) in Schedule 9 to FA 2002, paragraph 5(2) and (3),

(e) in Schedule 30 to that Act, paragraph 6,

(f) in Schedule 1 to CTA 2009, paragraph 361, and

(g) in Schedule 23 to FA 2009, paragraph 8.

Commencement and transitionals

6 (1) The amendments made by paragraphs 1 to 3 and 5 have effect in relation to
5disposals of shares or securities by companies made on or after the day on
which this Act is passed (“the commencement day”).

(2) But nothing in paragraph 1, 2 or 5 prevents section 31A of TCGA 1992 (asset-
holding company leaving group), as it had effect immediately before the
commencement day, continuing to have effect on or after that day in relation
10to cases where the section 30 disposal to which that section refers occurred
before that day.

(3) The amendment made by paragraph 4 has effect in relation to disposals of
shares or securities treated under section 179 of TCGA 1992 as taking place
on or after the commencement day.

(4) 15In this paragraph “securities” has the same meaning as in section 132 of
TCGA 1992.

Section 45

SCHEDULE 10 Company ceasing to be member of group

Degrouping

1 20In section 139 of TCGA 1992 (reconstruction involving transfer of business),
after subsection (1A) insert—

“(1B) Nothing in section 179(3D) prevents the two companies being
treated as mentioned in subsection (1).”

2 In section 171A of TCGA 1992 (election to reallocate gain or loss to another
25member of the group), omit subsection (7).

3 (1) Section 179 of TCGA 1992 (company ceasing to be member of group) is
amended as follows.

(2) In subsection (1)(a) for “company B is a member of a group” substitute
“company A and company B are members of the same group”.

(3) 30In subsection (1A) omit the words from “For this purpose” to the end.

(4) For subsection (2) substitute—

“(2) Where two companies cease to be members of the group at the same
time, subsection (1) does not have effect as respects the acquisition of
an asset by one of the companies from the other if condition A or B is
35met.

(2ZA) Condition A is that the companies—

(a) are both 75 per cent subsidiaries and effective 51 per cent
subsidiaries of another company on the date of the
acquisition, and

(b) remain both 75 per cent subsidiaries and effective 51 per cent
subsidiaries of that other company until immediately after
they cease to be members of the group.

(2ZB) Condition B is that one of the companies—

(a) 5is both a 75 per cent subsidiary and an effective 51 per cent
subsidiary of the other on the date of the acquisition, and

(b) remains both a 75 per cent subsidiary and an effective 51 per
cent subsidiary of the other until immediately after the
companies cease to be members of the group.”

(5) 10For subsection (2A)(a) substitute—

“(a) a company (“company A”) acquired an asset from another
company (“company B”) at a time when both company A and
company B were members of the same group (“the first
group”),

(aa) 15company A has ceased to be a member of the first group,”.

(6) After subsection (3) insert—

“(3A) Any chargeable gain or allowable loss which would otherwise
accrue to company A on the sale referred to in subsection (3) does not
so accrue if—

(a) 20company A ceases to be a member of the group in
consequence of—

(i) a disposal of shares in company A or another member
of the group made by a member of the group, or

(ii) two or more such disposals,

(b) 25either—

(i) subsection (3B) applies to the disposal or, if there is
more than one disposal, to at least one of them, or

(ii) sub-paragraph (i) does not apply but had subsection
(3B) applied to the disposal or, if there is more than
30one disposal, to each of them, any gain arising on the
disposal or disposals would not have been a
chargeable gain by virtue of Schedule 7AC, and

(c) in the absence of this subsection, section 535 of CTA 2010 (UK
REITS: exemption of gains) would not apply to the
35chargeable gain or allowable loss which would accrue to
company A on the sale.

(3B) This subsection applies to a disposal of shares if—

(a) the company making the disposal is resident in the United
Kingdom at the time of the disposal,

(b) 40the shares are chargeable assets in relation to that company
immediately before that time, or

(c) any part of the chargeable gain or allowable loss accruing on
the disposal is treated as a gain or loss accruing to a person
by virtue of section 13(2) (attribution of gains to members of
45non-resident companies).

In this section “group disposal” means a disposal within subsection
(3A)(a) to which this subsection applies and the company making the
disposal is referred to as “the transferor company”.

(3C) For the purposes of subsections (3A) and (3B), the question whether
there is a disposal is to be determined ignoring section 127 (share
reorganisations etc treated as not involving disposal).

(3D) If subsection (3A) applies, any chargeable gain or allowable loss
5accruing to the transferor company on a group disposal (other than
a group disposal to which section 127 applies) is to be calculated—

(a) where a chargeable gain would accrue to company A in the
absence of subsection (3A), as if the amount of the
consideration for the group disposal were increased by the
10amount of the gain, and

(b) where an allowable loss would accrue to company A in the
absence of subsection (3A), as if an amount equal to the
amount of the loss were a sum allowable under section 38 as
a deduction in the computation of the gain or loss accruing on
15the group disposal.

(3E) If subsection (3A) applies, and section 127 applies to a group
disposal, any chargeable gain or allowable loss accruing to the
transferor company on a disposal of the new holding arising from
the group disposal (or any part of that holding) is to be calculated—

(a) 20where a chargeable gain would accrue to company A in the
absence of subsection (3A)—

(i) as if an amount equal to the amount of the gain were
excluded from the expenditure allowable as a
deduction under section 38 in the computation of the
25gain or loss accruing on the disposal (but not so as to
reduce that expenditure below nil), and

(ii) where (ignoring sub-paragraph (i)) the amount of the
gain exceeds the expenditure allowable as such a
deduction, as if a gain equal to that excess accrued on
30the disposal of the new holding (or, if the disposal is
of a part of the new holding, a gain equal to the
corresponding part of that excess accrued on that
disposal), in addition to any gain or loss that actually
accrues on the disposal of the new holding or part,
35and

(b) where an allowable loss would accrue to company A in the
absence of subsection (3A), as if an amount equal to the
amount of the loss were a sum allowable under section 38 as
a deduction in the computation of the gain or loss accruing on
40the disposal.

In this subsection “new holding” has the meaning given by section
126.

(3F) If there is more than one group disposal, the references in
subsections (3D) and (3E) to the amount of the gain or loss which
45would accrue to company A in the absence of subsection (3A) are to
be read, in relation to each disposal, as references to—

(a) such proportion of that amount as the transferor companies
in relation to the group disposals jointly elect as the
appropriate proportion in relation to the disposal in question,
50or

(b) where no election is made, the proportion of that amount
attributable to that disposal if that amount is divided equally
between the group disposals.

(3G) An election under subsection (3F) must—

(a) 5specify the appropriate proportion in relation to each group
disposal, and

(b) be made, by notice to an officer of Revenue and Customs, no
later than 2 years after the end of the first accounting period
of a company in which any chargeable gain or allowable loss
10on a group disposal accrues.

(3H) If a group disposal by a company consists of shares of more than one
class, then, for the purposes of subsections (3D) and (3E), the
company may apportion any increase or deduction to be made
between the classes of shares in such manner as it considers
15appropriate.”

(7) For subsection (5) substitute—

“(5) Subsections (6) to (8) apply where—

(a) in the absence of subsection (6), company A would be treated
by virtue of subsection (3) as selling an asset at any time, by
20reason of ceasing to be a member of the group, and

(b) company A ceases to be a member of the group by reason
only of the fact that the principal company of that group
becomes a member of another group.”

(8) In subsection (6)—

(a) 25for “The company” to “but” substitute “Subsection (3) does not apply
to treat company A as selling the asset at that time; but”, and

(b) for “the company in question” (in each place) substitute “company
A”.

(9) In subsection (7) for “the company” (in both places) substitute “company A”.

(10) 30After that subsection insert—

“(7A) Any chargeable gain or allowable loss which would otherwise
accrue to company A on the sale referred to in subsection (6) does not
so accrue if—

(a) company A ceases at the relevant time to satisfy the
35conditions in subsection (7) in consequence of—

(i) a disposal of shares in company A, or another
member of the other group mentioned in subsection
(5)(b), made by a member of that other group, or

(ii) two or more such disposals,

(b) 40either—

(i) subsection (3B) applies to the disposal or, if there is
more than one disposal, to at least one of them, or

(ii) sub-paragraph (i) does not apply but had subsection
(3B) applied to the disposal or, if there is more than
45one disposal, to each of them, any gain arising on the
disposal or disposals would not have been a
chargeable gain by virtue of Schedule 7AC, and

(c) in the absence of this subsection, section 535 of CTA 2010 (UK
REITS: exemption of gains) would not apply to the
chargeable gain or allowable loss which would accrue to
company A on the sale.

(7B) 5Where subsection (7A) applies, subsections (3C) to (3H) apply to the
calculation of any chargeable gain or allowable loss accruing on a
disposal within subsection (7A)(a) to which subsection (3B) applies
(a “relevant disposal”) with the following modifications—

(a) in subsections (3C) to (3H) for the references to a group
10disposal substitute references to a relevant disposal, and

(b) in subsections (3C), (3D) and (3E) for the references to
subsection (3A) substitute references to subsection (7A).”

(11) In subsection (8) for the words from “the company” to the end substitute
“company A on the sale referred to in subsection (6) is to be treated as
15accruing immediately before the relevant time.”

(12) In subsection (10), for paragraph (a) substitute—

“(a) two companies are associated with each other if one is a 75
per cent subsidiary of the other or both are 75 per cent
subsidiaries of another company.”

(13) 20After that subsection insert—

“(10A) For the purposes of this section an asset is a “chargeable asset” in
relation to a company at any time if any gain accruing to the
company on a disposal of the asset by the company at that time—

(a) would be a chargeable gain and would by virtue of section
2510B form part of its chargeable profits for corporation tax
purposes, or

(b) would, but for Schedule 7AC (exemptions for disposals by
companies with substantial shareholdings), be within
paragraph (a).”

4 30After section 179 of TCGA 1992 insert—

“179ZA Claim for adjustment of calculations under section 179

(1) This section applies where—

(a) a gain accrues to a company (“company A”) on a sale referred
to in subsection (3) or (6) of section 179, or

(b) 35a gain would so accrue but for subsection (3A) or (7A) of that
section.

(2) If subsection (3D) or (3E) of that section applies in relation to one or
more group disposals (within the meaning of that section)—

(a) the company making the disposal, or

(b) 40if there is more than one disposal, the companies making
those disposals acting jointly,

may make a claim for the amount of the gain to be treated for the
purposes of the subsection in question as reduced by an amount
specified in the claim.

(3) 45In any other case, company A may make a claim for the amount of
the gain to be treated for all purposes of this Act as reduced by an
amount specified in the claim.

(4) Where a claim is made under subsection (2) or (3), the gain must be
treated, for the purposes mentioned in the subsection in question, as
reduced by such amount (if any) as is just and reasonable.

(5) In determining the amount which is just and reasonable regard must
5be had, in particular, to any transaction as a direct or indirect result
of which company A or any associated company (within the
meaning of section 179(10)) acquired the asset to which the gain
relates.

(6) Where under this section the gain accruing to company A on a sale
10referred to in subsection (3) or (6) of section 179 is treated as reduced
by an amount (“the permitted deduction”), the subsection in
question has effect, so far as it provides for the immediate
reacquisition of the asset by company A, as if the reference to market
value of the asset were to its market value less the permitted
15deduction.”

5 In TCGA 1992, the following provisions are repealed—

(a) section 179A (reallocation within group of gain or loss accruing
under section 179);

(b) section 179B (roll-over of degrouping charge on business assets);

(c) 20Schedule 7AB (roll-over of degrouping charge: modification of
enactments).

Substantial shareholding exemption

6 (1) Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with
substantial shareholdings) is amended as follows.

(2) 25After paragraph 15 insert—

“Effect of transfer of trading assets within a group

15A (1) For the purposes of this Part, the period for which the investing
company is treated as holding a substantial shareholding in the
company invested in is extended in accordance with sub-
30paragraph (3) if the following conditions are met.

(2) The conditions are—

(a) that, immediately before the disposal, the investing
company holds a substantial shareholding in the company
invested in,

(b) 35that an asset which, at the time of the disposal, is being
used for the purposes of a trade carried on by the company
invested in was transferred to it by the investing company
or another company,

(c) that, at the time of the transfer of the asset, the company
40invested in, the investing company and, if different, the
company which transferred the asset were all members of
the same group, and

(d) that the asset was previously used by a member of the
group (other than the company invested in) for the
45purposes of a trade carried on by that member at a time
when it was such a member.

(3) The investing company is to be treated as having held the
substantial shareholding at any time during the final 12 month
period when the asset was used as mentioned in sub-paragraph
(2)(d) (if it did not hold a substantial shareholding at that time).

(4) 5“The final 12 month period” means the period of 12 months
ending with the time of the disposal.”

(3) In paragraph 19 (requirements relating to the company invested in), after
sub-paragraph (2) insert—

“(2A) If the conditions in paragraph 15A(2)(b) to (d) are met, sub-
10paragraph (2B) applies for the purpose of determining whether
the requirement of sub-paragraph (1)(a) is satisfied.

(2B) The company invested in is to be treated as having been a trading
company at any time during the final 12 month period when the
asset was used as mentioned in paragraph 15A(2)(d) (if it was not
15a trading company at that time).

(2C) “The final 12 month period” has the meaning given in paragraph
15A(4).”

Intangible fixed assets: degrouping

7 (1) Part 8 of CTA 2009 (intangible fixed assets) is amended as follows.

(2) 20In section 780 (deemed realisation and reacquisition at market value), in
subsection (5)(b) before “associated” insert “certain”.

(3) In section 783 (associated companies leaving group at same time), for
subsection (1) substitute—

“(1) Where two companies cease to be members of a group at the same
25time, section 780 does not apply in relation to a transfer by one of the
companies to the other if condition A or B is met.

(1A) Condition A is that the companies—

(a) are both 75% subsidiaries and effective 51% subsidiaries of
another company on the date of the transfer, and

(b) 30remain both 75% subsidiaries and effective 51% subsidiaries
of that other company until immediately after they cease to
be members of the group.

(1B) Condition B is that one of the companies—

(a) is both a 75% subsidiary and an effective 51% subsidiary of
35the other on the date of the transfer, and

(b) remains both a 75% subsidiary and an effective 51%
subsidiary of the other until immediately after the companies
cease to be members of the group.”,

and, in the section heading, for “Associated” substitute “Certain associated”.

(4) 40In section 788 (provisions supplementing provisions about degrouping), for
subsection (3) substitute—

“(3) For the purposes of those sections and this section two companies are
associated with each other if one is a 75% subsidiary of the other or
both are 75% subsidiaries of another company.”

Consequential repeals

8 In consequence of the repeals made by paragraph 5, the following are also
repealed—

(a) in IHTA 1984, section 97(1)(a)(iii) and the “or” before it,

(b) 5in FA 2002, section 42(1) and (3)(a),

(c) in F(No.2)A 2005, in Schedule 4, paragraphs 8 and 10(3), and

(d) in FA 2009, in Schedule 12, paragraph 2.

Commencement

9 (1) The amendments made by paragraphs 1 to 5 and 8 have effect in relation to
10any disposal of an asset by one company (“company B”) to another company
(“company A”) made at a time when company B is a member of a group, if—

(a) company A ceases to be a member of the group on or after the
passing of this Act, or

(b) where company A ceased to be such a member before the passing of
15this Act in circumstances where section 179(6) to (8) of TCGA 1992
applied, company A ceases to satisfy the conditions in section 179(7)
of that Act on or after the passing of this Act.

(2) The amendments made by paragraph 6 have effect in relation to disposals of
shares made on or after the passing of this Act.

(3) 20The amendments made by paragraph 7 have effect in relation to any
disposal of an asset by one company (“company B”) to another company
(“company A”) made at a time when company B is a member of a group, if—

(a) company A ceases to be a member of the group on or after the
passing of this Act, or

(b) 25where company A ceased to be such a member before the passing of
this Act in circumstances where section 783 of CTA 2009 applied,
company A ceases to be a member of another group on or after the
passing of this Act.

(4) But where an early commencement election is made in relation to a group—

(a) 30sub-paragraphs (1) and (3) apply in relation to that group as if the
references in those sub-paragraphs to the passing of this Act were
references to 1 April 2011, and

(b) sub-paragraph (2) applies in relation to any disposal of shares by a
member of that group as if the reference in that sub-paragraph to the
35passing of this Act were a reference to 1 April 2011.

(5) An early commencement election in relation to a group means an election
made for the purposes of this paragraph by the principal company of the
group.

(6) If a company ceases to be a member of a group in the period which begins
40with 1 April 2011 and ends with the passing of this Act, an early
commencement election may be made or revoked in relation to the group
only with the consent of that company contained in a notice which
accompanies the election or revocation.

(7) Where an early commencement election is revoked, the election is treated as
45never having had effect.

(8) An early commencement election may not be made or revoked after 31
March 2012 (and paragraph 3(1)(b) of Schedule 1A to the Management Act
(amendment of elections etc) does not apply in relation to an early
commencement election).

Section 46

5SCHEDULE 11 Pre-entry losses

TCGA 1992

1 In section 177A of TCGA 1992 (restriction on set-off of pre-entry losses), omit
“and losses accruing on assets held by any company at such a time”.

2 10Schedule 7A to that Act (restriction on set-off of pre-entry losses) is amended
as follows.

3 (1) Paragraph 1 (application and construction of Schedule) is amended as
follows.

(2) In sub-paragraph (1) for “is or has been” substitute “becomes”.

(3) 15For sub-paragraph (2) substitute—

“(2) In this Schedule “pre-entry loss”, in relation to any company,
means any allowable loss that accrued to that company at a time
before it became a member of the relevant group.”

(4) Omit sub-paragraphs (3), (3A), (4) and (5).

(5) 20In sub-paragraph (6) for “Subject to” to “if” substitute “If”.

(6) Omit sub-paragraph (8).

4 Omit paragraphs 2 to 5 (determination of pre-entry proportion of losses on
pre-entry assets).

5 (1) Paragraph 6 (restrictions on the deduction of pre-entry losses) is amended as
25follows.

(2) In sub-paragraph (2)—

(a) omit paragraph (a) (and the “and” after it), and

(b) in paragraph (b), omit “in any other case”.

(3)
In sub-paragraph (3)—

(a) 30omit paragraph (a) (and the “and” after it), and

(b) in paragraph (b), omit “in the case of an election under sub-
paragraph (2)(b) above,”.

6 (1) Paragraph 7 (gains from which pre-entry losses are to be deductible) is
amended as follows.

(2) 35In sub-paragraph (1), for paragraph (c) substitute—

“(c) on the disposal of any asset in respect of which the conditions
in sub-paragraph (1A) are met.”