A popular area in the Advanced Tax group questions is the degrouping charge. (DGC).

When a building is transferred between companies in the same 75% CGT group, the transfer takes place at nil gain/nil loss.

If the company that now owns the building leaves the CGT group within 6 years of the transfer and STILL OWNS THE BUILDING AT THIS POINT, a DGC crystallises.

The DGC is computed based on market value at date of transfer less cost less indexation up to December 2017 and accrues to the parent company.

The DGC is added to the sale proceeds of the shares and if the 3 conditions for the substantial shareholding exemption (SSE) apply, it will make the DGC and the gain on the shares tax free.

The 3 conditions for the SSE are.

1.Minimum shareholding of 10%

2.Owned for at least 12 months out of the previous 6 years.

3.The shares sold must be in a trading company