Advanced Taxation (UK) · Corporation tax: the effect of a group structure

Chargeable Gains Groups and Degrouping Charges for ACCA ATX

Updated 11 October 2026 · Fact-checked

Within a 75% gains group, assets transfer between companies at no gain/no loss. Gains and losses can be reallocated by joint election, and rollover relief works across the group. If a company leaves the group within six years of receiving an asset, a degrouping charge arises, added to the sale proceeds of the shares.

Understand Chargeable Gains Groups and Degrouping Charges

A chargeable gains group lets companies move assets around without tax. A transfer between two group companies is treated as made at a price that gives no gain and no loss. The transferee takes over the transferor's original cost, so the gain is deferred, not removed.

The group is made up of a principal company and its 75% subsidiaries, including indirect ones. The principal company must also hold an effective interest of more than 50% in the lower companies. Group relief for losses uses the same 75% subsidiary test with the more than 50% effective interest requirement. But group relief has its own extra rules, such as consortium relief, and the gains group does not need those. Check which regime the question is about before you apply a test.

Two useful routes sit on top of no gain/no loss. First, the company that made a disposal to an outsider and another group company can jointly elect to treat the whole, or a fraction, of that gain or loss as accruing to the other company. The election only covers a gain or loss that has accrued on the disposing company's own external disposal. It must be made jointly by the two companies within two years of the end of the accounting period of the disposing company. This lets you match gains with losses or use the lower tax position of another company. Second, a group is treated as a single unit for rollover relief. A gain on a qualifying asset sold by one company can be rolled into a qualifying asset bought by another group member, if the conditions are met and the reinvestment is made within the time limits.

The risk is degrouping. If a company leaves the group within six years of receiving an asset on a no gain/no loss basis, and still owns the asset when it leaves, it is treated as having sold and immediately reacquired the asset at market value at the date it acquired it. That date is the date of the original intra-group transfer. The resulting gain or loss is not taxed on the leaving company. It is added to, or deducted from, the proceeds on the sale of the shares in the leaving company by the vendor group company. That can sometimes be covered by the substantial shareholding exemption, in which case the whole of the share sale and the degrouping gain can be exempt.

An election can be made to reallocate the degrouping charge to another group member, and rollover relief claims can be made on it. Always ask who is selling, what is being sold and whether an exemption applies.

Key rules to remember

Gains group test: Principal company + 75% subsidiaries (direct or indirect) + effective interest of more than 50% in the lower companies; Group relief uses the same 75% subsidiary and more than 50% effective interest test, but it also has its own extra rules, such as consortium relief. Apply the rules of the regime the question is about.
Intra-group transfer: Deemed proceeds = transferor's original cost, so gain = 0 and loss = 0; The transferee inherits the transferor's base cost and the gain is deferred. Indexation allowance was frozen at December 2017, so it matters only for assets held at that date.
Joint election: Whole or a fraction of a gain or loss on the disposing company's external disposal may be treated as accruing to another group company; The disposing company and the company receiving the gain or loss must elect jointly. The election must be made within two years of the end of the disposing company's accounting period.
Degrouping charge: Market value at date of intra-group transfer − base cost (as at that date) = degrouping gain; The company is treated as selling and immediately reacquiring the asset at market value on the date it acquired it. Applies if the company leaves within six years and still owns the asset.
Treatment of the charge: Adjusted share proceeds = share sale proceeds + degrouping gain (or minus degrouping loss); The seller of the shares is taxed or exempt under the substantial shareholding exemption.
Rollover relief across a group: Gain immediately chargeable = lower of (gain, proceeds not reinvested). Gain deferred = gain − gain immediately chargeable; The deferred gain reduces the base cost of the new asset. The group is treated as one for reinvestment, but the asset must be a qualifying business asset used in the trade.
Corporation tax rates: Small profits rate 19% and main rate 25%. Marginal relief applies between £50,000 and £250,000.; Both come from the tax tables. Use the main rate on gains for companies above £250,000.

How to solve Chargeable Gains Groups and Degrouping Charges questions

Use this approach for any question on gains in a group, whether it asks for a computation or for advice on a sale.

1Draw the group structure and mark percentages. Confirm whether the companies are in the same gains group.
2Identify each asset transfer. If both companies are in the group, the transfer is no gain/no loss.
3Check whether a company is leaving the group, and whether it received an asset within the last six years that it still holds.
4If so, compute the degrouping gain as if the leaving company had sold and immediately reacquired the asset at market value on the date of the intra-group transfer: market value at that date less the cost carried across.
5Add the degrouping gain to the share proceeds (or deduct a loss). Check whether the substantial shareholding exemption applies to the share sale.
6Look for planning points. Consider a joint election to reallocate the gain or loss to a company with spare losses, or consider rollover relief.
7Apply the tax rate from the tax tables, compute the tax and state the due date or any other point raised.
8Close with a short recommendation that fits the client's commercial aims.

Quickest way: Group gains in five checks

When to use it: Use this when time is short and the question has several companies and several disposals.

Sketch the group and underline the 75% links.
Mark each transfer as in-group (no gain/no loss) or external (taxable).
Look for a company leaving: if yes, date back six years and test each asset.
Check for exemption: substantial shareholding exemption may remove both the share gain and the degrouping gain.
Offer one planning point, such as a joint election or rollover relief, and state the effect in pounds.

Common mistakes in Chargeable Gains Groups and Degrouping Charges

Taxing an intra-group transfer at market value.
You treat it like a sale to a third party.
Fix: Transfer at no gain/no loss at original cost. Tax only arises on a later external sale or on degrouping.
Assuming group status without testing the holdings through each link.
You look only at the direct holding and forget indirect holdings and the effective interest test.
Fix: Apply the 75% subsidiary test through each link and check that the principal company has an effective interest of more than 50% in the lower companies. Group relief uses the same test but has extra rules, such as consortium relief, so do not copy conclusions across without checking.
Taxing the degrouping gain on the company that leaves.
The company holds the asset, so it seems to be the taxpayer.
Fix: The charge is added to the proceeds on the sale of the shares in the leaving company, so it falls on the vendor company.
Applying degrouping where the asset has been sold before the company leaves.
You forget the condition that the company must still hold the asset.
Fix: Check that the asset is still owned on leaving and that the transfer was within six years.
Forgetting to test the substantial shareholding exemption.
The degrouping charge looks like its own tax item.
Fix: If the exemption applies to the share sale, the degrouping gain is added to the proceeds and so falls within it. Say so.
Applying rollover relief without checking qualifying assets or time limits.
You assume group status gives automatic relief.
Fix: Confirm the asset is used in a trade by a group member, that it is in a qualifying class, and that reinvestment falls within the period allowed by the legislation.

Worked examples

Example 1

Alpha Ltd owns 100% of Beta Ltd and Gamma Ltd. Beta Ltd sells a building to an outsider and makes a gain of £180,000. In the same period Gamma Ltd sells a plot of land to an outsider and makes a capital loss of £60,000. Gamma and Beta make a joint election to treat the whole of Gamma's loss as accruing to Beta. Ignore indexation and other reliefs. Explain the position and compute the net chargeable gain in Beta Ltd.

Show the solution

All three companies are in the same gains group, since Alpha holds 100% of each of them.
Beta's gain of £180,000 is a gain on a disposal to an outsider and is taxable in Beta.
Gamma's loss of £60,000 arises on its own disposal to an outsider. The election applies to a gain or loss on an outside disposal. It does not move an unused loss that is simply carried in a company.
Gamma and Beta, the two companies named in the election, jointly elect to treat the £60,000 loss as accruing to Beta.
Beta's net chargeable gain is £180,000 − £60,000 = £120,000.
The gain is taxed at the rate applicable to Beta's total profits for the period, and the election must be made jointly in the time allowed.

Answer: The net chargeable gain in Beta Ltd is £120,000 after Gamma's £60,000 loss is treated as accruing to Beta under the joint election.

Example 2

Delta Ltd owns 100% of Echo Ltd. Four years ago, Delta transferred a factory to Echo. Delta's original cost was £400,000. Its market value on transfer was £700,000. Delta now sells all the shares in Echo to an outside buyer for £2,000,000. The base cost of the shares is £900,000. Echo still owns the factory. Assume the substantial shareholding exemption does not apply. Compute Delta's chargeable gain on the share sale. Ignore indexation and assume the share sale is the only disposal.

Show the solution

Echo leaves the group within six years of receiving the factory on a no gain/no loss basis and still owns it. A degrouping charge applies.
Degrouping gain = market value at the transfer date less base cost: £700,000 − £400,000 = £300,000.
Share proceeds are adjusted: £2,000,000 + £300,000 = £2,300,000.
Gain on shares = £2,300,000 − £900,000 = £1,400,000.
Delta is taxed on £1,400,000. If the substantial shareholding exemption had applied, the whole gain would be exempt.

Answer: Delta's chargeable gain is £1,400,000, which includes the degrouping gain of £300,000.

Practice questions from Corporation tax: the effect of a group structure

Chargeable Gains Groups and Degrouping Charges in other exams

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

ACCA Applied SkillsChargeable Gains Groups and Transfers