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CTA09/PART8/S785 - exception to degrouping adjustment rules

Background

In certain circumstances, such as its being acquired by another company, the principal company of a group may itself become a member of another group.

If at any time the principal company of a group becomes a member of another group, the first group and the other group are regarded as the same. But this does not mean that every member of the target group necessarily becomes a member of the new enlarged group.

Take the case where the principal company X of one group becomes a member, but not a wholly owned subsidiary, of another group headed by principal company Y. Any company Z which was a member of X’s group but is not an effective 51% subsidiary of Y will cease to be a member of a group for the purposes of CTA09/PART8. This is so, even though X’s group and Y’s group are deemed to be the same group.

Degrouping

»Ê¹ÚÌåÓýapp effect of the special rules that apply in this case is that there is no immediate degrouping adjustment on Z when Z leaves the X/Y group by virtue of X becoming a member of Y’s group.

»Ê¹ÚÌåÓýappre may, however, be an equivalent charge at a later stage if Z ceases to satisfy the ‘qualifying conditionâ€� that it is a relevant subsidiary of one or more companies in the group headed by company Y, see CIRD40560.

For the purposes of this condition, a company P is a relevant subsidiary of another company Q if, but for sections 767 to 770 of CTA09, it would be a member of a group of which company Q would be the principal company.