Corporation Tax Act 2009 section 785

Principal company becoming member of another group

Section 785 deals with what happens when a group restructuring occurs because the principal company of a group joins another group, and whether a degrouping charge on intangible fixed assets arises in those circumstances.

• When a company leaves a group solely because the principal company joins another group, the normal degrouping charge does not apply immediately
• However, if the transferee company stops being a relevant subsidiary of the new (second) group within 6 years of the original intra-group asset transfer, and the asset is still held within the group, a deemed disposal and reacquisition at market value is triggered
• Any resulting adjustments for the period between the original transfer and the loss of qualifying status are treated as arising immediately before the transferee ceased to qualify
• The degrouping charge does not apply if the transferee loses its qualifying status because of a relevant disposal of shares, or if the merger was carried out for genuine commercial reasons