A very popular area in the Advanced Tax exam which is due to be examined in September 2022 is CGT groups.

For CGT groups, the direct shareholding must be at least 75% but the indirect only has to be 51%.

Companies in the same group can transfer assets to group members at nil gain/nil loss. (NG/NL). This means the transfer value is original cost plus indexation from date bought up to December 2017.

If the asset is then sold outside the group, this transfer value becomes the deemed cost.

Alternatively, the company that owns the asset could leave the 75% CGT group within 6 years of the transfer still owning the asset. This results in a degrouping charge (DGC)

The easiest way to think of a DGC is it is simply the gain that would arise if the asset had been sold outside the group at the date of the NG/NL.

The DGC is computed based on market value less cost less indexation to December 2017.

The DGC accrues to the parent company selling the shares and is added to the sale proceeds of the shares. If the shares are eligible for the SSE, the DGC will become tax free.

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