Taxation (UK) · The effect of a group corporate structure for corporation tax purposes

Chargeable Gains Groups: No Gain No Loss and Degrouping

Updated 11 October 2026 · Fact-checked

Within a gains group, assets transfer between companies at no gain and no loss, so the receiving company takes over the original cost plus enhancement expenditure. Tax arises when the asset is sold outside the group, or when the receiving company leaves the group still owning the asset (degrouping charge). A joint election can reallocate a gain or loss to another group company.

Understand Chargeable Gains Groups and Transfers

A company pays corporation tax on its chargeable gains. Without special rules, moving an asset between two companies in the same group would trigger a gain. That would make reorganising a group expensive. The group rules remove this problem.

A company is a member of a gains group if it is a 75% subsidiary of the principal company, directly or indirectly, and the principal company has an effective interest of more than 50% in it. Both tests must be met. The 75% test is on ordinary share capital. The effective interest test is applied alongside it. For indirect holdings, multiply the percentages along the chain. Overseas companies can be members of a gains group, but a transfer is no gain no loss only where the asset would be within the charge to UK tax on a gain.

When one group company transfers a chargeable asset to another, the transfer is treated as made at no gain no loss. The transferor is treated as receiving the amount that gives neither gain nor loss, namely its original cost plus any enhancement expenditure. The transferee takes over that figure as its own cost. The gain is therefore deferred, not removed. It becomes taxable when the asset is sold outside the group.

The degrouping charge stops abuse. Suppose a company receives an asset by a no gain no loss transfer, and then leaves the group while still owning the asset. It is treated as having sold and reacquired the asset at its market value at the time of the original no gain no loss transfer. The resulting gain or loss is treated as arising immediately before the company leaves the group. It is calculated and taxed at that point, not at the date of the transfer. In practice the gain or loss is usually added to (or deducted from) the proceeds on the sale of the shares of the leaving company, so it affects that share sale.

Two companies in a gains group can also make a joint election about a disposal of an asset outside the group by one of them. The whole or part of the gain or loss on that disposal is treated as made by the other company. Both companies must be in the same gains group, and both must make the election. This allows a gain to be matched against capital losses in another company, since a company's capital losses can only be set against its own gains.

Key rules to remember

Gains group test: Company is a 75% subsidiary of the principal company (directly or indirectly, ordinary share capital) AND the principal company has an effective interest of more than 50% in it; Both tests must be met. Check indirect holdings by multiplying percentages along the chain.
No gain no loss transfer: Deemed proceeds = cost + enhancement expenditure; Transferee takes this figure as its cost. No gain or loss arises on the transfer.
Degrouping charge condition: Company leaves the group while still holding an asset acquired by a no gain no loss transfer from a group company; Asset treated as sold and reacquired at market value at the time of the original transfer. The gain or loss arises immediately before the company leaves the group.
Degrouping gain: Market value at the time of the transfer − (cost + enhancement expenditure); Added to or deducted from the proceeds of the share sale.
Joint election: Whole or part of a gain or loss on a disposal outside the group by one gains group company treated as made by another company in the same gains group; Both companies must make the election. Used to match gains with capital losses.

How to solve Chargeable Gains Groups and Transfers questions

Use this approach for any group chargeable gains question.

1Draw the group structure and mark the percentage holdings. Confirm which companies are in the gains group: a 75% subsidiary of the principal company, with the principal company's effective interest above 50%.
2Identify each transfer or disposal. Decide whether it is within the group or to an outsider.
3For an intra-group transfer, state no gain no loss. Pass the original cost plus enhancement to the transferee.
4For a sale outside the group, compute the gain as normal using the cost carried over by the transferee.
5Check whether any company leaves the group. If it still holds an asset acquired intra-group, compute the degrouping charge.
6Consider the joint election if one group company has a capital loss and another has a gain.
7Add the chargeable gains to each company's profits and state the total chargeable gains per company.

Quickest way: Quick group gains check

When to use it: Use this when time is short in an objective test case or a short part of a constructed response question.

Is the company a 75% subsidiary with the principal company's effective interest above 50%? If yes, an intra-group transfer is no gain no loss.
Is the buyer outside the group? If yes, compute the gain using original group cost.
Did the transferee leave the group still holding the asset? If yes, degrouping gain based on market value at transfer.
Is there a loss in one company and a gain in another? Say a joint election can reallocate the gain or loss.

Common mistakes in Chargeable Gains Groups and Transfers

Computing a gain on a transfer between group companies.
Students treat the transfer as a normal disposal at market value.
Fix: If both companies are in the gains group, deemed proceeds equal cost plus enhancement, so there is no gain or loss.
Using market value as the transferee's base cost after an intra-group transfer.
The transferee seems to have bought the asset.
Fix: The transferee takes over the transferor's original cost and enhancement expenditure.
Applying the degrouping charge when the asset was sold before the company left.
Students see a company leaving and apply the charge automatically.
Fix: The charge applies only if the company still holds the asset, acquired by a no gain no loss transfer, when it leaves the group.
Saying a capital loss in one company can be set against another company's gain directly.
Confusion with group relief for trading losses.
Fix: Capital losses cannot be surrendered. Use a joint election to treat the gain or loss on a disposal outside the group as made by the other company.
Counting a holding of exactly 75% incorrectly, or ignoring indirect holdings.
Rushing the structure.
Fix: The test is at least 75%, so exactly 75% qualifies. Multiply percentages for indirect holdings and check that the principal company's effective interest is more than 50%.

Worked examples

Example 1

A Ltd owns 80% of B Ltd. A Ltd bought land for £120,000 in 2018 and transferred it to B Ltd in the current year when its market value was £200,000. B Ltd later sells the land to an outsider for £260,000. Compute the gain arising on the transfer and on the sale.

Show the solution

A Ltd owns 80%, which is at least 75%, so A Ltd and B Ltd are in a gains group.
The transfer is no gain no loss. Deemed proceeds are the original cost of £120,000, so no gain or loss arises for A Ltd.
B Ltd takes the land at a cost of £120,000.
On the outside sale, the gain is £260,000 − £120,000 = £140,000.
The gain of £140,000 is chargeable on B Ltd.

Answer: No gain on the transfer. B Ltd has a chargeable gain of £140,000 on the sale.

Example 2

X Ltd owns 100% of Y Ltd. X Ltd bought a building for £300,000. It transferred it to Y Ltd when its market value was £450,000. Two years later X Ltd sells all the shares in Y Ltd to an outsider, and Y Ltd still owns the building. Compute the degrouping gain and explain who is charged.

Show the solution

The transfer was no gain no loss, so Y Ltd took a cost of £300,000.
Y Ltd leaves the group while still holding the asset, so a degrouping charge arises.
Y Ltd is treated as having sold and reacquired the building at market value of £450,000 at the date of the transfer.
Degrouping gain = £450,000 − £300,000 = £150,000.
The gain is generally added to the proceeds on the sale of the Y Ltd shares by X Ltd, so it is taxed within X Ltd's computation for the share disposal.

Answer: The degrouping gain is £150,000. It is normally included in X Ltd's share sale computation, increasing the chargeable gain there.

Exam tips

Draw the group diagram first. Marks often come from correctly stating whether the 75% test and the effective interest test are met.
Say 'no gain no loss' by name, and give the figure passed on: cost plus enhancement expenditure.
For degrouping, state that the company must leave the group while still holding an asset acquired by a no gain no loss transfer. The asset is treated as sold and reacquired at market value at the time of the original transfer, with the gain or loss arising immediately before the company leaves.
In written answers, mention the joint election when one company has a capital loss and another has a gain. Say it applies to a disposal outside the group and that both companies in the gains group must make it.
In objective tests, read carefully for the holding percentage and whether the buyer is inside or outside the group.

Practice questions from The effect of a group corporate structure for corporation tax purposes

Chargeable Gains Groups and Transfers in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Strategic ProfessionalChargeable Gains Groups and Degrouping Charges

Chargeable Gains Groups and Transfers: frequently asked questions

What is a no gain no loss transfer in a group?

It is a transfer of a chargeable asset between companies in the same gains group. The transfer is treated as made for the original cost plus enhancement expenditure, so no gain or loss arises. The receiving company takes over that cost.

When does the degrouping charge apply?

It applies when a company leaves the group while still owning an asset it acquired by a no gain no loss transfer from a group company. It is treated as having sold and reacquired the asset at market value at the time of the original transfer. The gain or loss arises immediately before the company leaves, and it is usually added to or deducted from the proceeds of the sale of the company's shares.

How do you move a gain to another group company?

Two companies in the same gains group make a joint election. It must relate to a disposal of an asset outside the group by one of them, and both companies must make it. The whole or part of the gain or loss is then treated as made by the other company. This lets you use a capital loss in one company against a gain in another.

Can a group company surrender a capital loss like a trading loss?

No. Capital losses can only be used against gains of the same company. Moving an asset within the group does not transfer a capital loss. To use the loss across the group, the two companies make the joint election to reallocate the gain or loss on a disposal outside the group.